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Item 1A. Risk Factors" of this Annual Report on Form 10-K and (ii) in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of First Financial's 2025 Annual Report to Shareholders (included within Exhibit 13 to this Annual Report on Form 10-K and incorporated by reference into Item 7 of this Annual Report on Form 10-K).
The Company’s cybersecurity program is overseen by its Chief Information Security and Privacy Officer (the “CISO”). The Company’s CISO has over 25 years of experience in information security and technology governance, risk, and compliance, including a previous CISO position at a large regional bank. The Company’s CISO has also held leadership roles in enterprise risk management and internal audit for large financial service organizations, as well as at a global audit, assurance, and advisory firm. The CISO meets quarterly with and chairs the Cyber ERM Committee, which consists of representatives from the officer of enterprise security, information technology, risk, compliance, and other internal stakeholders, and presents quarterly to the Enterprise Risk Management Committee (“ERMC”), which includes executive and senior leadership of the Company, and the Risk and Compliance Committee of the Board of Directors (“Board Risk Committee”). The CISO meets quarterly with and chairs the Cyber ERM Committee, which consists of representatives from the officer of enterprise security, information technology, risk, compliance, and other internal stakeholders, and presents quarterly to the Enterprise Risk Management Committee (“ERMC”), which includes executive and senior leadership of the Company, and the Risk and Compliance Committee of the Board of Directors (“Board Risk Committee”). The management of risk from cybersecurity threats is one of the risks that is continuously assessed, monitored and managed by the Company under the Company’s ERM framework which is described more fully in the Company’s Annual Report to Shareholders. The CISO maintains a scorecard which monitors and measures various cyber risks, including:
The Company uses a variety of tools to monitor and mitigate cybersecurity risks, including employee training, simulated phishing exercises, incident response tabletops, cybersecurity insurance, and business continuity planning for the protection of the Company’s assets. Additionally, the Company’s cybersecurity function is audited on an annual basis by internal audit and external regulatory examiners .
Forward-looking statements speak only as of the date on which they are made, and, except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified in their entirety by the foregoing cautionary statements.
PART I
Item 1. Business.
First Financial Bancorp.
First Financial Bancorp., an Ohio corporation (First Financial or the Company), was formed in 1982. First Financial is a mid-sized, regional bank holding company headquartered in Cincinnati, Ohio, which has elected to become a financial holding company. References in this Form 10-K to “we,” “us” or “our” refer, as the context requires, to First Financial and its subsidiaries, collectively or to First Financial as the holding company.
First Financial engages in the business of commercial banking and other banking and banking-related activities through its wholly-owned subsidiary, First Financial Bank (the Bank), which was founded in 1863. Effective December 30, 2016, the Bank converted its charter to an Ohio state chartered bank from a nationally chartered bank.
The range of banking services provided by First Financial to individuals and businesses includes commercial lending, real estate lending and consumer financing. Real estate loans are loans secured by a mortgage lien on the real property of the borrower, which may either be residential property (one to four family residential housing units) or commercial property (owner-occupied and/or investor income producing real estate, such as apartments, shopping centers, or office buildings). Risk of loss related to lending activities is managed by adherence to standard loan policies that establish certain levels of performance prior to the extension of a loan to the borrower. In addition, First Financial offers deposit products that include interest-bearing and noninterest-bearing accounts, time deposits and cash management services for retail and commercial customers. A full range of trust and wealth management services is also provided through First Financial’s Wealth Management line of business.
Commercial and industrial loans are made to all types of businesses for a variety of purposes including, but not limited to, inventory, receivables and equipment. First Financial works with businesses to meet their shorter-term working capital needs while also providing long-term financing for their business plans. First Financial also offers lease and equipment financing primarily through its wholly-owned subsidiary Summit Funding Group, Inc. (Summit) (discussed below). Credit risk for lending activities is managed through standardized loan policies, established and authorized credit limits, centralized portfolio management and the diversification of market area and industries. The overall strength of the borrower is evaluated through the credit underwriting process and includes a variety of analytical activities, including the review of historical and projected cash flows, financial performance, financial strength of the principals and guarantors and collateral values, where applicable.
Commercial and industrial lending activities also include equipment and leasehold improvement financing for franchisees throughout the U.S., principally in the quick service and casual dining sector. The underwriting of these loans incorporates basic credit proficiencies combined with knowledge of select franchise concepts to measure the creditworthiness of proposed multi-unit borrowers. The focus is on a limited number of concepts that we believe have sound economics, lower closure rates, and higher brand awareness within specified local, regional or national markets. Loan terms for equipment are generally up to 84 months fully amortizing and up to 180 months on real estate-related requests.
First Financial also offers secured commercial financing throughout the U.S. through two wholly-owned subsidiaries of the Bank, Oak Street Funding LLC (Oak Street) and First Franchise Capital Corporation (First Franchise). Oak Street lends to the insurance industry, registered investment advisors, certified public accountants and indirect auto finance companies, while First Franchise lends to restaurant franchisees. Together, these niche lending activities are driven by acquisitions, ownership transitions and financing general working capital needs. The underwriting of Oak Street's loans involves analyses of collateral (through use of Oak Street’s proprietary system) that consists of revenue, which is then continuously monitored by Oak Street throughout the life of the loans.
Commercial real estate loans are secured by a mortgage lien on the real property. The credit underwriting for both owner-occupied and investor income producing real estate loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of lessees and lessors, type of real estate and other analyses. Market diversification within First Financial’s service area and industry diversification are other means by which First Financial manages the risk. First Financial does not have a significant exposure to residential builders and developers.
Certain residential real estate loans originated by the Bank conform to secondary market underwriting standards and are sold within a short timeframe to unaffiliated third parties. The Bank sells these loans with both servicing retained and servicing released, depending on pricing and other market conditions. The credit underwriting standards adhere to a required level of documentation, verifications, valuation and overall credit performance of the borrower. The credit underwriting standards adhere to a required level of 1TABLE OF CONTENTSdocumentation, verifications, valuation and overall credit performance of the borrower. The underwriting of these loans
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includes an evaluation of these and other pertinent factors prior to the extension of credit. These underwriting standards increase the marketability and address the credit risk associated with the loans.
Consumer loans are primarily loans made to individuals, which may be secured or unsecured.Consumer loans are primarily loans made to individuals. These types of loans include new and used vehicle loans, second mortgages on residential real estate and unsecured loans. Risk elements in the consumer loan portfolio are primarily focused on the borrower’s cash flow and credit history, which are key indicators of the ability to repay. A level of security is provided through liens on automobile titles and second mortgage liens, where applicable. Consumer loans are generally smaller dollar amounts than other types of lending and are made to a large number of customers, increasing diversification within the portfolio. Economic conditions that affect consumers in First Financial’s markets have a direct impact on the credit quality of these loans. Higher levels of unemployment, lower levels of income growth and weaker economic growth are factors that may adversely impact consumer loan credit quality.
Home equity lines of credit consist mainly of revolving lines of credit secured by residential real estate. Home equity lines of credit are generally governed by the same lending policies and subject to the same credit risk mitigants as described previously for residential real estate loans.
Bannockburn Global Forex (Bannockburn), a division of the Bank, is an industry-leading capital markets firm based in Cincinnati, Ohio, that provides transactional currency payments, foreign exchange hedging, commodities hedging and other advisory products to closely held enterprises, financial sponsors and downstream financial institutions across the United States.Bannockburn Global Forex (Bannockburn), a division of the Bank, is an industry-leading capital markets firm based in Cincinnati, Ohio, that provides transactional currency payments, foreign exchange hedging and other advisory products to closely held enterprises, financial sponsors and downstream financial institutions across the United States. Their primary focus is on small- and middle-market clients that have a need for tailored foreign exchange solutions. Bannockburn has a nationwide presence with offices in 11 locations throughout the U.S.
Agile Premium Finance, a division of the Bank, is among industry leaders in the premium finance lending space and is active in all 50 states. Headquartered in Lincolnshire, IL, Agile originates commercial loans for the payment of annual premiums for property and casualty insurance for businesses. Agile loans are secured by the unearned premium of the insurance policies and have an average original term of approximately ten months.
Information regarding statistical disclosure required by the Securities and Exchange Commission’s Industry Guide 3 is included in "Table 4 - Statistical Information" of First Financial's 2025 Annual Report to Shareholders for the year ended December 31, 2025, and is incorporated herein by reference.
First Financial's executive office is located at 255 East Fifth Street, Suite 2900, Cincinnati, Ohio 45202, and the telephone number is (877) 322-9530. We maintain a website with the address www.bankatfirst.com. The information contained on our website is not included, a part of or incorporated by reference into this Annual Report on Form 10-K. First Financial makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, free of charge, as soon as reasonably practicable after filing with the Securities and Exchange Commission (SEC), through its website, www.bankatfirst.com under the “Investor Relations” link, under “Financial Reporting.” Copies of such reports also can be found on the SEC’s website at www.sec.gov.
Human Capital
As of December 31, 2025, First Financial had approximately 2,199 employees located primarily in the states of Ohio, Indiana, Kentucky and Illinois.
Employee Wellbeing. First Financial is committed to investing in our employees, recognizing that employee wellbeing is integral to our organizational culture and long-term success. The Company’s approach to wellbeing is multifaceted, supporting employees and their families across five core areas: physical, financial, social, community, and purpose. Our comprehensive Wellbeing Program is designed to promote holistic health and engagement. The program offers a variety of incentives, including health savings account contributions, paid time off, and reimbursements, to encourage voluntary participation in activities such as annual physical exams, health-risk assessments, educational webinars, community service, financial assistance initiatives, and Company-sponsored fitness activities. The program provides employees with incentives (such as health savings account contributions, paid time off and reimbursements) in exchange for voluntary participation in a range of activities, including an annual physical, health-risk assessment, webinar participation and enrollment in Company sponsored fitness activities. Additionally, the program provides access to life coaching, mental health resources, and stress management support. In 2025, approximately 60% of eligible employees qualified for benefits under the Wellbeing Program, underscoring our commitment to fostering a healthy, engaged workforce. The Company views employee engagement as a foundational element in achieving strategic objectives and maintaining a high-performance culture.
Employee Engagement. First Financial recognizes that engaged and talented employees are vital to the success of the Company, its subsidiaries, and the clients and communities it serves. First Financial continues to develop our DEI strategy, which includes goals and action plans designed to increase associate and management diversity. Since launching its engagement strategy in 2020, First Financial has partnered with a third party to foster a culture of engagement through comprehensive measurement, targeted manager training, coaching, and action planning. In July 2025, the Company conducted its sixth all-associate engagement
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survey, recording a significant increase in engagement compared to the prior year. This result underscores the effectiveness of initiatives such as manager accountability, coaching, training, regular team huddles, mentoring, career and leadership development, and updated action plans. Throughout 2025, First Financial expanded opportunities for associate communication and involvement, hosting monthly virtual town hall meetings and in-person market rallies across its footprint. These events enhanced transparency, reinforced strategic priorities, and celebrated contributions to the communities we serve. Additionally, supplemental pulse surveys provided valuable insight into employee needs, shaping future engagement initiatives. Reflecting the success of its engagement strategy, First Financial Bank was honored with the Gallup Exceptional Workplace Award in 2025.
Compensation and Benefits. First Financial offers employees competitive short-term and long-term compensation, a comprehensive set of benefits including health, dental and vision insurance, free or low-cost access to an independent provider of primary care clinics and behavioral health services, life and disability programs, paid time off, parental leave, product discounts and various expense reimbursement programs. First Financial offers employees competitive short-term and long-term compensation, a comprehensive set of benefits including health, dental and vision insurance, free or low-cost access to an independent provider of primary care clinics, life and disability programs, parental leave, product discounts and various expense reimbursement programs. First Financial also provides all eligible employees with an annual allocation to the First Financial Pension Plan of 5% of eligible annual pay. First Financial also provides all eligible employees with a 5% annual allocation to the First Financial Pension Plan of eligible annual pay. The pension allocation is 100% company-paid, fully-vested, portable, and provides a guaranteed benefit upon retirement. The pension allocation is 100% company-paid, fully-vested and portable. The Bank regularly reviews its total rewards practices to ensure compensation is equitable, taking into consideration such factors as experience, education, performance and market data.
Talent Development. First Financial focuses our training programs on career development, onboarding new associates, security, and compliance. While many training topics are required based on role, we offer a variety of topics associates can access for their own development. In 2025, we offered on-the-job skills, leadership, associate engagement, personal development, and career development training. Our commitment to security training comprises both physical and cybersecurity, and our compliance training centers around regulations, policies, and procedures. Similar to prior years, in 2025, First Financial delivered a comprehensive onboarding program for new managers and a high performing program for associates, investing in our future leaders.
Subsidiaries
A listing of each of First Financial’s subsidiaries can be found in Exhibit 21 to this Form 10-K.
Business Combinations
Agile Premium Finance. On February 29, 2024, First Financial acquired Agile Premium Finance for $96.9 million in an all cash transaction. Agile originates commercial loans for the payment of annual property and casualty insurance for businesses. The loans are secured by the unearned premium of the policies and have an average term of approximately ten months. Upon completion of the transaction, Agile became a division of the Bank and continues to operate as Agile Premium Finance, taking advantage of its existing brand recognition within the insurance premium financing industry. Upon completion of the transaction, Summit became a subsidiary of the Bank and continues to operate as Summit Funding Group, taking advantage of its existing brand recognition within the equipment financing industry.
Operating results from the Agile acquisition have been included in the Consolidated Statements of Income since the acquisition date. The Agile transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $97.8 million and $2.7 million, respectively. Acquisition accounting adjustments are considered final at December 31, 2025.
Goodwill arising from the Agile acquisition was $1.8 million and reflects the additional revenue growth expected with the Company's expansion into the insurance premium financing business. First Financial incurred $0.1 million and $0.2 million of expenses related to the Agile acquisition for the years ended December 31, 2025 and December 31, 2024, respectively. The goodwill arising from the Agile acquisition is deductible for income tax purposes. For further detail, see Note 10 – Goodwill and Other Intangible Assets.
Westfield Bancorp. Inc. On November 1, 2025, First Financial Bancorp acquired Westfield Bancorp, Inc., an Ohio corporation (“Westfield Bancorp”). Upon completion of the transaction, Westfield Bank, FSB, a federal savings bank (“Westfield Bank”), and a wholly owned subsidiary of Westfield Bancorp, merged into First Financial Bank. Pursuant to the Purchase Agreement, First Financial acquired all of the issued and outstanding equity securities of Westfield Bancorp in exchange for a cash payment of $260.0 million and 2,753,094 shares of First Financial common stock, equal to $64.4 million based on First Financial's stock price on the date the transaction, for a total purchase price of $324.4 million.
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This acquisition supplements First Financial’s existing commercial banking and wealth management presence in Northeast Ohio by adding all of Westfield’s retail banking locations and its commercial lending, insurance agency lending and private banking services. Operating results from the Westfield acquisition have been included in the Consolidated Statements of Income since the acquisition date.
The Westfield transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $2.1 billion and $1.9 billion, respectively. Acquisition accounting adjustments are considered preliminary at December 31, 2025. These present value measurements are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period ends in November 2026.
Goodwill arising from the Westfield acquisition was $91.9 million and reflects the additional revenue growth expected with the Company's expansion into the insurance premium financing business. The goodwill arising from the Westfield acquisition is nondeductible for income tax purposes. For further detail, see Note 10 – Goodwill and Other Intangible Assets.
First Financial incurred $5.8 million of expenses related to the Westfield acquisition for the year ended December 31, 2025.
BankFinancial Corporation. In August 2025, the Company entered into an Agreement and Plan of Merger with BankFinancial Corporation, a Maryland corporation (“BankFinancial Corporation”). The transaction was completed subsequent to the end of the year, effective January 1, 2026, at which time BankFinancial, National Association, a national banking association, and a wholly owned subsidiary of BankFinancial Corporation, merged into First Financial Bank. As of December 31, 2025, BankFinancial Corporation operated 17 full-service banking offices and had, on an unaudited basis, approximately $1.4 billion of total assets, $700.2 million of total loans and $1.2 billion of total deposits.
Pursuant to the merger agreement, each share of BankFinancial Corporation common stock was converted into 0.48
shares of First Financial common stock, or 5,980,878 total shares of First Financial common stock.
Given the transaction closed subsequent to December 31, 2025, the BankFinancial acquisition had no impact on First Financial's Consolidated Financial Statements as presented in this Annual Report on Form 10-K.
Market and Competitive Information
First Financial utilizes a community banking business model and serves a combination of metropolitan and non-metropolitan markets through its full-service banking centers primarily in Ohio, Indiana, Kentucky and Illinois. Market selection is based upon a number of factors, but markets are primarily chosen for their potential for growth, long-term profitability and customer reach. First Financial’s goal is to develop a competitive advantage through a local market focus, building long-term relationships with clients to help them reach greater levels of financial success.
We also compete on a nationwide basis through Oak Street, which lends to the insurance industry, registered investment advisors, certified public accountants and indirect auto finance companies; First Franchise, which lends to restaurant franchisees; Bannockburn, which provides foreign exchange services to customers throughout the United States; and Summit, which provides equipment financing to commercial businesses in the United States and Canada.We also compete on a nationwide basis through Oak Street, which lends to the insurance industry, registered investment advisors, certified public accountants and indirect auto finance companies, First Franchise, which lends to restaurant franchisees, Bannockburn, which provides foreign exchange services to customers throughout the United States, and Summit, which provides equipment financing to commercial businesses to the United States and Canada.
The Company’s markets support many different types of business activities, such as manufacturing, agriculture, education, healthcare and professional services. Within these markets, growth is projected to continue in key demographic groups and populations. First Financial’s market evaluation includes demographic measures such as income levels, median household income and population growth. The Midwestern markets that First Financial serves have historically not experienced the level of economic volatility experienced in other areas of the country, although material fluctuations may occur.
First Financial believes that it is well positioned to compete in its markets. Smaller than super-regional and multi-national bank holding companies, First Financial believes that it can meet the needs of its markets through a local decision-making process and that it is better positioned to compete than smaller community banks that may have size or geographic limitations. First Financial’s targeted customers include individuals and small to medium sized businesses within the Bank's geographic footprint. Through its diversified delivery systems of banking centers, ATMs, internet banking and telephone-based transactions, First Financial is able to meet the needs of its customers in an ever-changing marketplace.
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First Financial faces strong competition from financial institutions and other non-financial organizations. Its competitors include local and regional financial institutions, savings and loans and bank holding companies, as well as some of the largest banking organizations in the United States. In addition, other types of financial institutions, such as credit unions, offer a wide range of loan and deposit services that are competitive with those offered by First Financial. The consumer is also served by brokerage firms and mutual funds that provide checking services, credit cards, margin loans and other services similar to those offered by First Financial. Online lenders also create additional competition, particularly in the mortgage and consumer lending areas. Major consumer retail stores compete for loans by offering credit cards and retail installment contracts. It is anticipated that competition from other financial and non-financial services entities will continue and, for certain products and services, intensify. First Financial also competes with Financial Technology Companies (“FinTechs”) which provide similar services to financial institutions while operating predominantly online and without the use of physical branch locations in a customer’s market area. FinTechs also compete with financial institutions by embedding financial services into non-bank platforms which could reduce customer reliance on traditional banking services. Digital assets and cryptocurrencies also operate as competitors, as many of these digital assets and cryptocurrencies seek to provide payment functionality. Many customers either hold or may consider holding money that would typically be held in deposit accounts or investments in the form of digital assets or cryptocurrencies, which serves as competition for deposits.
Supervision and Regulation
First Financial and its subsidiaries operate within a comprehensive system of federal and state banking laws and regulations designed primarily to protect consumers, depositors, borrowers, and the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC), and to promote the stability and soundness of the U.S. banking system. These laws and regulations are not designed for the protection of First Financial shareholders. These laws and regulations govern, among other matters, capital adequacy, permissible activities, allowance for credit losses, lending practices, investment activities, interest rate practices, and disclosures in consumer financial products. These laws and regulations govern areas such as capital, permissible activities, allowance for credit losses, loans and investments, interest rates that can be charged on loans and consumer protection communications and disclosures.
As a public company, First Financial also files reports with the SEC and is subject to its regulatory authority, including the disclosure and regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to First Financial’s securities, financial reporting and certain governance matters. Because First Financial’s securities are listed on the Nasdaq Global Select Market (“Nasdaq”), it is subject to Nasdaq's rules for listed companies, including rules relating to corporate governance.
Certain elements of selected laws and regulations are described in more detail in the sections that follow. Certain elements of selected laws and regulations are described in more detail in the sections that follow. These descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described.
Bank Holding Company Financial Holding Company Regulation
First Financial is a bank holding company that has elected to become a financial holding company and is subject to supervision and examination by the Board of Governors of the Federal Reserve System (Federal Reserve) under the Bank Holding Company Act of 1956, as amended (BHCA). Under the BHCA, the Federal Reserve must approve, among other things, (i) the direct or indirect acquisition of ownership or control (as defined in the BHCA and Federal Reserve regulations) of a bank that is not already majority-owned by the financial holding company; (ii) the acquisition of all or substantially all of the assets of another bank or another financial or bank holding company; or (iii) a merger or consolidation with any other financial or bank holding company. The BHCA requires prior approval by the Federal Reserve Board in any case where a financial holding company proposes to: (i) acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by the financial holding company; (ii) acquire all or substantially all of the assets of another bank or another financial or bank holding company; or (iii) merge or consolidate with any other financial or bank holding company. In addition, the acquisition of a savings and loan association by First Financial would also require prior Federal Reserve approval. In addition, First Financial’s acquisition of a savings and loan association requires prior Federal Reserve Board approval.
As a financial holding company, First Financial may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and not otherwise permissible for a bank holding company, if: (i) the holding company is "well managed" and "well capitalized" and (ii) each of its subsidiary banks (a) is well capitalized under the Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, (b) is well managed, and (c) has at least a "satisfactory" rating under the Community Reinvestment Act (CRA). If any holding company fails to maintain these qualifications, material restrictions may be placed on its activities, and it could be required to divest subsidiaries engaged in activities not permissible for bank holding companies not operating as financial holding companies. If restrictions are imposed on the activities of a financial holding company, the existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies. No regulatory approval is required under the BHCA for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. The Financial Services Modernization Act defines “financial in nature” to include: (i) securities underwriting, dealing and market making; (ii)
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sponsoring mutual funds and investment companies; (iii) insurance underwriting and agency; (iv) merchant banking; and (v) activities that the Federal Reserve Board has determined to be closely related to banking.
The Federal Reserve adopted a final rule in April 2020 clarifying presumptions used to determine when a company exercises control over another entity for BHCA purposes, enhancing transparency in control determinations. The rule established tiered presumptions of control based on ownership percentage, director representation, business relationships, and contractual rights.
The Federal Reserve has broad enforcement authority over bank holding companies, including the ability to impose civil money penalties, issue cease and desist or removal orders, and require divestitures of subsidiary entities.The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including the ability to assess civil monetary penalties, issue cease and desist or removal orders, and require that a bank holding company divest subsidiaries (including a subsidiary bank). A bank holding company is expected to act as a source of financial strength to its subsidiary banks, and the Federal Reserve may limit dividends or require contributions of capital where necessary or prudent. A bank holding company is required by law and Federal Reserve Board policy to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank.
Federal Reserve System Regulation
Each subsidiary bank of a financial holding company is subject to certain restrictions on the maintenance of reserves against deposits, extensions of credit to the financial holding company and its subsidiaries, investments in the stock and other securities of the financial holding company and its subsidiaries and the taking of such stock and securities as collateral for loans to borrowers. Further, a financial holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property or furnishing of any services. Various consumer laws and regulations also affect the operations of these subsidiaries.
Depository institutions, including the Bank, are required to maintain reserves against certain deposit liabilities. In response to the COVID-19 pandemic, the Federal Reserve reduced reserve requirement ratios to 0% effective March 26, 2020, and this level remained unchanged as of December 31, 2025. The Federal Reserve retains authority to reinstate reserve requirements at any time.
Economic Growth, Regulatory Relief and Consumer Protection Act
The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 modified or eliminated certain enhanced regulatory and compliance requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) for bank holding companies with consolidated assets below $100 billion. As a bank holding company with assets below this threshold, First Financial benefits from relief from certain enhanced regulatory reporting, stress testing, and capital planning requirements.
Depository Institution Regulation
The Bank, as a bank chartered under the laws of the State of Ohio and a member of the Federal Reserve Bank of Cleveland (Federal Reserve Bank), is subject to supervision and examination by the Federal Reserve Board and the Ohio Division of Financial Institutions (ODFI). The Bank's deposits are insured up to applicable legal limits by the DIF, which is administered by the FDIC and is subject to the provisions of the Federal Deposit Insurance Act, as amended (FDIA). The Bank is also subject to regulations of the Consumer Financial Protection Bureau (CFPB), which was established by the Dodd-Frank Act and has broad powers to adopt and enforce consumer protection regulations.
In November 2025, banking regulators announced that the focus of supervision and examination would shift from “processes, procedures and documentation” to material financial risks. The Bank anticipates that the shift in focus of banking regulators could result in more concise and directed examinations as a result of the more clear and limited directives.
Regulatory Capital
Financial institutions and their holding companies are required to maintain capital as a way of absorbing losses. The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies as well as state banks that are members of a Federal Reserve Bank. The guidelines provide a systematic analytical framework that makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and incentivizes to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.
In July 2013, the United States banking regulators approved final rules (the Basel III Capital Rules) implementing the Basel III framework set forth by the Basel Committee on Banking Supervision, as well as certain provisions of the Dodd-Frank Act. Community banking organizations, including First Financial and the Bank, began transitioning to the new rules when the new
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minimum capital requirements became effective on January 1, 2015. A capital conservation buffer (i.e. common equity) and additional deductions from common equity capital were phased in through January 1, 2019.
The Basel III capital rules include (i) a minimum Common Equity Tier 1 capital ratio of 7.0%, (ii) a minimum Tier 1 Capital ratio of 8.5%, (iii) a minimum total capital ratio of 10.5% and (iv) a minimum leverage ratio of 4.0%.
Common equity for the Common Equity Tier 1 capital ratio generally consists of common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital) and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.Common equity for the common equity tier 1 capital ratio generally consists of common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital) and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.
Tier 1 capital generally includes Common Equity Tier 1 (CET1) capital and Additional Tier 1 capital. CET1 capital generally consists of common stock and related surplus (net of treasury stock), retained earnings, accumulated other comprehensive income (subject to any applicable opt-out), and certain other comprehensive income elements, less required regulatory deductions and adjustments.
Additional Tier 1 capital generally includes qualifying noncumulative perpetual preferred stock and related surplus, as well as other qualifying Additional Tier 1 instruments, including limited amounts of minority interests. For bank holding companies that made a timely election under the regulatory capital transition provisions, certain trust preferred securities and cumulative perpetual preferred stock may continue to qualify as Additional Tier 1 capital under grandfathering provisions, subject to applicable limits. Tier 1 capital is reduced by required regulatory deductions and adjustments.
Tier 2 capital consists of qualifying subordinated debt, certain preferred stock instruments that do not qualify as Additional Tier 1 capital, limited amounts of minority interests not included in Tier 1 capital, and an eligible portion of the allowance for credit losses (or allowance for loan and lease losses, as applicable). Tier 2 capital is subject to specified eligibility criteria, phase-ins, regulatory limits, and required deductions.
The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).
Under the guidelines, capital is compared to the relative risk included in the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and stock repurchases, and certain discretionary bonus payments to executive officers if the Company does not hold a capital conservation buffer of at least 2.5% composed of common equity tier 1 capital compared to its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and stock repurchases, and certain discretionary bonus payments to executive officers if the Company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital compared to its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.
Federal banking regulators have established regulations governing prompt corrective action to resolve capital deficient banks. Under these regulations, institutions that become under-capitalized are subject to mandatory regulatory scrutiny and limitations, which increase as capital continues to decrease. Each such institution is also required to file a capital plan with its primary federal regulator, and its holding company must guarantee the capital shortfall up to the lesser of 5% of the assets of the capital deficient institution at the time it becomes under-capitalized, or the amount necessary to restore bank to adequately capitalized status. Each such institution is also required to file a capital plan with its primary federal regulator, and its holding company must guarantee the capital shortfall up to 5% of the assets of the capital deficient institution at the time it becomes under-capitalized.
In accordance with the Basel III Capital Rules, in order to be “well-capitalized” under the prompt corrective action guidelines, a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital ratio of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level or any capital measure. In accordance with the Basel III Capital Rules, in order to be “well-capitalized” under the prompt corrective action guidelines, a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital ratio of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level or any capital measure. At December 31, 2025, the Bank met the capital ratio requirements to be deemed “well-capitalized.”
A bank with a capital level that might qualify for well capitalized or adequately capitalized status may nevertheless be treated as though the bank is in the next lower capital category if the bank’s primary federal banking supervisory authority determines that an unsafe or unsound condition or practice warrants that treatment. A bank’s operations can be significantly affected by its capital classification under the prompt corrective action rules. For example, a bank that is not well capitalized generally is
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prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market without advance regulatory approval. These deposit-funding limitations can have an effect on the bank’s liquidity. At each successively lower capital category, an insured depository institution is subject to additional restrictions. At each 6TABLE OF CONTENTSsuccessively lower capital category, an insured depository institution is subject to additional restrictions. Under-capitalized banks are required to take specified actions to increase their capital or otherwise decrease the risks to the DIF. Bank regulatory agencies generally are required to appoint a receiver or conservator within 90 days after a bank becomes critically under-capitalized with a leverage ratio of less than 2.0%. The FDIA provides that a federal bank regulatory authority may require a bank holding company to divest itself of an under-capitalized bank subsidiary if the agency determines that divestiture will improve the bank’s financial condition and prospects.
Debit Card Interchange Fees
The “Durbin Amendment” to the Dodd-Frank Act, also known as Regulation II limits the amount of interchange fees that banks with assets of $10 billion or more may charge to process electronic debit transactions. Under the Durbin Amendment and the Federal Reserve Board’s implementing regulations, bank issuers which are not exempt may only receive an interchange fee from merchants that is reasonable and proportional to the cost of clearing the transaction. The maximum permissible interchange fee is equal to no more than $0.21 plus 5 basis points of the transaction value for many types of debit interchange transactions. A debit card issuer may also recover $0.01 per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements established by the Federal Reserve Board. In addition, the Federal Reserve Board has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.
Limitations on Dividends and Other Payments
There are various legal limitations on the extent to which a subsidiary bank may finance or otherwise supply funds to its parent holding company. Under applicable federal and state laws, the Bank may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, First Financial. A subsidiary bank is also subject to collateral security requirements for any loan or extension of credit permitted by such exceptions.
The Bank may not pay dividends out of its surplus if, after paying these dividends, it would fail to meet the required minimum capital levels established by the Federal Reserve Board. The amount of dividends payable by the Bank is also restricted if the Bank does not hold a capital conservation buffer as described above. In addition, the Bank must have the approval of the Federal Reserve Board and the ODFI if a dividend in any year would cause the total dividends for that year to exceed the sum of the Bank’s net income for the current year and the retained earnings for the preceding two years, less required transfers to surplus or to fund the retirement of preferred stock. Under Ohio law, the Bank may pay a dividend from surplus only with the approval of First Financial (as the sole shareholder of the Bank) and the approval of the ODFI. Payment of dividends by the Bank may be restricted at any time at the discretion of its regulatory authorities, if such regulatory authorities deem such dividends to constitute unsafe and/or unsound banking practices or if necessary to maintain adequate capital.
The ability of First Financial to obtain funds for the payment of dividends, for the servicing of indebtedness and for other cash requirements is largely dependent on the amount of dividends that may be declared by the Bank. However, because the Federal Reserve Board expects First Financial to serve as a source of strength to the Bank, as discussed above, payment of dividends by the Bank may be restricted at any time at the discretion of the Federal Reserve Board if the Federal Reserve Board deems such dividends to constitute an unsafe and/or unsound banking practice.
The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial holding companies and other bank holding companies. The policy statement provides that, as a matter of prudent banking, a bank holding company should not maintain a rate of cash dividends unless its net income available to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the bank holding company’s capital needs, asset quality, and overall financial condition. Accordingly, a bank holding company generally should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. Accordingly, a bank holding 7TABLE OF CONTENTScompany generally should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. Under certain circumstances, a bank holding company must provide notice to the Federal Reserve Board of an intended dividend payment, to which the Federal Reserve Board might object if it determines the payment would be an unsafe or unsound practice.
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Insurance of Accounts
The FDIC maintains the DIF, which insures the deposit accounts of the Bank to the maximum amount provided by law. The general insurance limit is $250,000 per depositor, per ownership category, which is backed by the full faith and credit of the United States.
The FDIC assesses deposit insurance premiums on each insured institution quarterly based on risk characteristics of the institution. As a bank with assets of more than $10 billion, First Financial is subject to a deposit assessment based on a scorecard issued by the FDIC. This scorecard considers, among other things, the Bank’s CAMELS rating, results of asset-related stress testing and funding-related stress, as well as its use of core deposits, among other things. Depending on the results of the Bank’s performance under that scorecard, the total base assessment rate is between 2.5 and 42 basis points. The FDIC may also impose a special assessment in an emergency situation.
To address losses attributable to the systemic risk determination following the failures of Silicon Valley Bank and Signature Bank, the FDIC adopted a special assessment regime. In December 2025, the FDIC issued an interim final rule amending the collection framework for the special assessment to better align the assessment base with estimated losses, adjust the rate for the final collection quarter, and provide for potential offsets or final shortfall assessments after receivership termination. Estimated losses recoverable through the special assessment are approximately $16.7 billion as of September 30, 2025.
As of December 31, 2025, the Bank reported $7.4 billion in uninsured deposits.
The FDIC has authority to examine and require reporting from insured institutions and may terminate deposit insurance upon finding unsafe or unsound practices, violations of law, or material regulatory breaches.
Community Reinvestment Act
Under the CRA, FDIC-insured institutions are obligated, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires the appropriate federal banking regulator, in connection with the examination of an insured institution, to assess the institution's record of meeting the credit needs of its community and to consider this record in its evaluation of certain applications to banking regulators, such as an application for approval of a merger or the establishment of a branch. An unsatisfactory rating may be used as the basis for the denial of an application and will prevent a bank holding company from making an election to become a financial holding company. As of the Bank’s most recent CRA examination, it received a rating of “outstanding” under applicable CRA regulations. As of its most recent examination, the Bank received a CRA rating of “outstanding.
Federal banking agencies had issued a final rule in October 2023 designed to modernize CRA regulations with applicability originally scheduled for 2026 and 2027. However, in light of litigation challenging the 2023 CRA rule’s implementation, the agencies, on July 16, 2025, proposed rescinding the 2023 rule and reinstating the prior regulatory framework, substantially equivalent to the regulations in effect prior to the 2023 rule, with certain technical updates. While the proposal remains subject to notice and comment, the prior regulatory framework continues to govern CRA evaluations.
Consumer Protection Regulation and CFPB Supervision
The Bank is subject to extensive federal consumer protection laws and regulations enforced by the Consumer Financial Protection Bureau (“CFPB”), including, among others, the Consumer Financial Protection Act, the Consumer Leasing Act of 1976, the Electronic Fund Transfer Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Gramm-Leach-Bliley Act (“GLBA”), the Home Mortgage Disclosure Act of 1975, the Homeowners Protection Act of 1998, the Military Lending Act, the Real Estate Settlement Procedures Act of 1974, the Truth in Lending Act, and the Truth in Savings Act. As a bank with total assets exceeding $10 billion, the Bank is primarily examined by the CFPB with respect to consumer protection compliance. As a bank with total assets in excess of $10 billion, the Bank is primarily examined by the CFPB with respect to consumer protection laws and regulations. In 2025, the United States Congress reduced federal funding to the CFPB, and the agency’s status is currently undergoing changes of leadership, goals, directive, and enforcement capabilities. The Bank will monitor the status of the CFPB and implement any necessary changes to its policies, procedures, and/or operations in response to any changes with the CFPB.
Privacy Rules
Federal banking regulators, as required under the GLBA, have adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to non-affiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal
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information to non-affiliated third parties. The privacy provisions of the GLBA affect how consumer information is transmitted through diversified financial services companies and conveyed to outside vendors.
Fiscal and Monetary Policies
The earnings of banks, and, therefore, the earnings of First Financial (and its subsidiaries), are affected by the fiscal and monetary policies of the United States government and its agencies, including the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the national supply of bank credit in an effort to prevent recession and to restrain inflation. Among the procedures used to implement these objectives are open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements on member bank deposits. These policies are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.
Volcker Rule
In December 2013, five federal agencies adopted a final regulation implementing the so-called Volcker Rule provision of the Dodd-Frank Act (the "Volcker Rule"). The Volcker Rule placed limits on the trading activity of insured depository institutions and entities affiliated with depository institutions, subject to certain exceptions. Such trading activity included the purchase or sale as principal of a security derivative, commodity future, option, or similar instrument in order to benefit from short-term price movements or to realize short-term profits. The Volcker Rule exempted trading in specified United States government, agency, state and/or municipal obligations. The Volcker Rule also excluded: (i) trading conducted in certain capacities, including as a broker or other agent, through a deferred compensation or pension plan, as a fiduciary on behalf of customers; (ii) trading to satisfy a debt previously contracted; (iii) trading under certain repurchase and securities lending agreements; and (iv) trading in connection with risk-mitigating hedging activities. Further, the Volcker Rule prohibited a banking entity from having an ownership interest in, or certain relationships with, a hedge fund or private equity fund, also known as “covered funds,” subject to a number of exceptions.
On June 25, 2020, the federal bank regulatory agencies finalized a rule modifying the Volcker Rule’s prohibition on banking entities investing in or sponsoring covered funds. The new rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address. To the extent First Financial engages in any of the trading activities or has any ownership interests in or relationship with any of the types of funds regulated by the Volcker Rule, First Financial believes that its activities and relationships comply with such rule, as modified through rule-making. To the extent First Financial engages in any of the trading activities or has any ownership interests in or relationship with any of the types of funds regulated by the Volcker Rule, First Financial believes that its activities and relationships comply with such rule, as modified through rule-making.
Office of Foreign Assets Control Regulation
The United States Treasury Department’s Office of Foreign Assets Control ("OFAC") administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. First Financial is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations. The Bank has established policies and procedures that it considers to be in compliance with the requirements and obligations of OFAC and the laws it regulates. The Bank has established policies and procedures that it considers to be in compliance with the requirements of the Patriot Act.
Incentive Compensation
Following the adoption of additional listing requirements in 2023 to comply with the Dodd-Frank Act and rules adopted by the SEC in October 2022, public companies are required to adopt, implement and disclose a "clawback" policy for incentive compensation payments that allows recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating an accounting restatement due to material noncompliance with financial reporting requirements. This clawback policy is intended to apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including former executives) who received incentive awards. This clawback policy is intended to apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives (including former executives) who received incentive awards. First Financial has adopted and implemented a clawback policy, which is included as Exhibit 97 to this Report. First Financial has adopted and implemented a clawback policy, which is included as Exhibit 97 to this Report.
Transactions with Affiliates; Insider Loans
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Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board Regulation W generally:
•limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10.0% of the bank's capital stock and surplus;
•limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with all affiliates to an amount equal to 20.0% of the bank's capital stock and surplus; and
•require that all such transactions be on terms substantially the same, or at least as favorable to the bank or subsidiary, as those provided to a non-affiliate.
An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank. The term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate and other similar types of transactions. The term “covered transaction” includes the making of loans to the affiliate, the purchase of assets from the affiliate, the issuance of a guarantee on behalf of the affiliate, the purchase of securities issued by the affiliate and other similar types of transactions.
A bank’s authority to extend credit to executive officers, directors and greater than 10.0% shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the Federal Reserve Board. Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially similar to those offered to unaffiliated individuals or be made as part of a benefit or compensation program on terms widely available to employees and must not involve a greater than normal risk of repayment. Among other things, these loans must be made on terms (including interest rates charged and collateral required) substantially similar to those offered to unaffiliated individuals or be made as part of a benefit or compensation program on terms widely available to employees and must not involve a greater than normal risk of repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.
Cybersecurity
In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cybersecurity-attack. If First Financial fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.
In November 2021, the FDIC, the OCC and the Federal Reserve Board issued a final rule that became effective in May 2022 requiring banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs when there is a violation or imminent threat of a violation to banking security policies and procedures, or when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs. The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident that rises to the level of a notification incident has occurred. These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into larger incidents. This rule also requires bank service providers to notify their customers of a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.11TABLE OF CONTENTSState regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. First Financial expects this trend of new state-level activity to continue and is actively monitoring developments in the states in which we conduct business.
On July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in a Current Report on Form 8-K and detailed information regarding their cybersecurity risk management, strategy, and governance on an annual basis in an Annual Report on Form 10-K. Companies are required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination. Companies are required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination. See “ITEM 1C
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CYBERSECURITY” of Part 1 of this Report. These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.
In the ordinary course of business, First Financial relies on electronic communications and information systems to conduct its operations and to store sensitive data. First Financial employs an in-depth, layered, defensive approach that leverages people, processes, third-party service providers, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. First Financial employs an in-depth, layered, defensive approach that leverages people, processes, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. First Financial utilizes a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as report on any suspected advanced persistent threats. Notwithstanding the strength of First Financial’s defensive measures, the threat from cybersecurity-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. First Financial’s systems and those of its customers and third party service providers are under constant threat and it is possible that First Financial could experience a significant event in the future. First Financial’s systems and those of its customers and third-party service providers are under constant threat and it is possible that First Financial could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, in addition to the expanding use of internet banking, mobile banking and other technology-based products and services by us and our customers.
Patriot Act
A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. In response to the terrorist events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "Patriot Act") substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties, and expanding the extra-territorial jurisdiction of the United States. The Patriot Act gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act encourage information sharing among bank regulatory agencies and law enforcement bodies. Title III of the Patriot Act encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions. Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. The Bank has established policies and procedures that it considers to be in compliance with the requirements of the Patriot Act.
State Law
As an Ohio-chartered bank, the Bank is subject to regular examination by the ODFI. State banking regulation affects the Bank’s internal organization and corporate governance, capital distributions, activities, acquisitions of other institutions and branching. State banking regulation may contain limitations on an institution’s activities that are in addition to limitations imposed under federal banking law. The ODFI may initiate supervisory measures or formal enforcement actions, and under certain circumstances, it may take control of an Ohio-chartered bank.
Future Legislation and Regulation
Federal and state banking laws, regulations and regulatory policies are subject to ongoing review and revision by Congress, state legislatures and applicable regulatory agencies. In addition to the specific statutory and regulatory developments discussed above, the enactment of new legislation or regulations, changes to existing laws or supervisory policies, or changes in the interpretation or application thereof, may adversely affect First Financial, the Bank and their respective subsidiaries in ways that are difficult to anticipate. In addition, large loans, letters of credit and contracts with individual counterparties in our portfolio magnify the credit risk that we face, as the impact of large borrowers and counterparties not repaying their loans or performing according to the terms of their contracts has a disproportionately significant impact on our credit losses and reserves. Such developments could impact First Financial and the Bank’s business activities, financial condition and results of operations, and may increase regulatory reporting obligations and compliance costs. The ultimate substance, timing and effect of any pending or future legislative or regulatory initiatives, and the manner in which they may be implemented or applied, cannot be predicted.
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Item 1A. Risk Factors.
The risks listed here are not the only risks we face. Additional risks that are not presently known, or that we presently deem to be immaterial, also could have a material effect on our financial condition, results of operations, business and prospects. You should carefully consider the following risk factors that may affect our financial condition, results of operations, business and prospects. You should carefully consider the following risk factors that may affect our financial condition, results of operations, business and prospects. Additionally, the aggregate impact of multiple risk factors, whether presently deemed material or immaterial, could similarly result in a material effect on our financial condition, results of operations, business and prospects. (See also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional discussion of forward looking statements that could result in a material effect on our financial condition, results of operations, business and prospects.)
Risks Related to Economic and Market Conditions
Weakness in the economy and governmental policies, whether or not adopted in response to economic conditions such as inflation, may adversely affect us. Our success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies.First Financial’s success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies. Conditions such as inflation, deflation, recession, unemployment, changes in interest rates, tariffs, fiscal and monetary policy and other factors beyond our control may affect our deposit levels and composition, demand for loans and other products and services, the ability of borrowers to repay their loans and the value of the collateral securing the loans it makes. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy and other factors beyond First Financial’s control may affect its deposit levels and composition, demand for loans, the ability of borrowers to repay their loans and the value of the collateral securing the loans it makes. Economic turmoil in different regions of the world, as well as military conflicts such as those currently ongoing in Russia, Ukraine, the Middle East, China, and Venezuela affect the economy and stock prices in the United States, which can affect our earnings and capital and the ability of our customers to repay loans. Economic turmoil in different regions of the world, as well as military conflicts such as those currently ongoing in Ukraine and the Middle East, affect the economy and stock prices in the United States, which can affect First Financial’s earnings and capital and the ability of its customers to repay loans.
U.S. trade policies and international economic relationships continue to evolve, including potential changes to trade agreements and tariffs. Such changes may contribute to economic uncertainty and could negatively affect financial markets, supply chains, and the economic performance of the Company’s customers and markets. Trade wars and tariffs can affect the economy and stock prices in the United States and can impact the costs of goods paid by customers, which can affect our deposit levels and concentration, the demand for loans and other products and services and the ability of our customers to repay outstanding loans, which could adversely affect our financial condition and the results of operations.
If the strength of the United States economy declines, this could result in, among other things, a deterioration of credit quality, altered consumer spending habits, decreased deposit balances maintained by our customers, or a reduced demand for credit, including a resultant effect on our loan portfolio and allowance for credit losses. Although the Federal Reserve eased monetary policy in 2025 with a series of rate cuts that brought the target federal funds range down to 3.50% – 3.75% by year-end, policymakers paused rate reductions in early 2026 and signaled patience in setting future policy as inflation remains elevated and labor market signals evolve. Despite these reductions, the future path of interest rates remains uncertain. Market and policy forecasts have not settled on expectations in the coming year. A scenario in which short-term interest rates remain elevated for longer than currently anticipated, or rise again in response to inflation or other macroeconomic developments, could increase stress on borrowers, potentially leading to higher delinquencies and charge-offs and adversely affecting our financial condition and results of operations. In addition, earnings sensitivity may be driven not only by rate levels but also by rate volatility and speed of rate changes, which may reduce hedge effectiveness and pressure margins.
There is no assurance that our non-impaired loans will not become impaired or that our impaired loans will not suffer further deterioration in value. A slowing labor market, declining savings, higher interest rates and sticky inflation could cause financial stress to consumers and slacken consumption. The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may result in increased charge-offs and, consequently, reduce our net income. These fluctuations are not predictable, cannot be controlled and may have a material impact on our operations and financial condition even if other favorable events occur.
Changes in leadership of the Federal Reserve Board of Governors may adversely affect us. The Federal Reserve is the primary regulator of bank holding companies and financial holding companies, and is also responsible for regulating the money supply and credit conditions in the United States. The monetary policies and regulations of the Federal Reserve have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future.
The Federal Reserve is expected to go through a change of leadership in 2026. The term of the Chair of the Federal Reserve Board of Governors, Jerome Powell, expires on May 15, 2026. On January 30, 2026, Kevin Warsh was nominated as the
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successor to Chair Powell. Mr. Warsh must be confirmed by the United States Senate prior to becoming the Chair of the Federal Reserve Board of Governors.
A change in leadership may result in policy changes of the Federal Reserve related to the regulation of bank holding companies and financial holding companies, the money supply, and/or credit conditions in the United States. The effects of such policies upon our financial condition, results of operations, business and prospects cannot be predicted or determined.
Changes in market interest rates or financial markets could affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital or liquidity. Given the nature of our business, and the fact that most of our assets and liabilities are financial in nature, we tend to be sensitive to market interest rate movements and the performance of the financial markets.Given the nature of our business, and the fact that most of our assets and liabilities are financial in nature, we tend to be sensitive to market interest rate movements and the performance of the financial markets. Our primary source of income is net interest income, which is the difference between the interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the interest expense generated by our interest-bearing liabilities. Prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, significantly affect financial institutions’ net interest income. If the interest we pay on deposits and other borrowings increases at a faster rate than increases in the interest we receive on loans and investments, net interest income, and, therefore, our earnings, could be affected. Earnings and capital levels could also be affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings.
In addition to the general impact of the economy, changes in interest rates or in valuations in the debt, equity, commodities or currency markets could directly impact us in one or more of the following ways:
•the yield on earning assets and rates paid on interest bearing liabilities may change in disproportionate ways;
•the value of certain balance sheet and off-balance sheet financial instruments or the value of equity investments that we hold could decline;
•the value of assets for which we provide processing services could decline;
•the bank's profitability may decline due to negative impacts of increased market volatility;
•insured and/or uninsured depositors may seek alternative investments, making the bank more reliant on alternative, more expensive funding sources;
•the demand for loans and refinancings may decline, which could negatively impact income related to loan originations;
•the reset on interest rates on adjustable rate mortgages could cause financial strain on borrowers, making them more likely to default; or
•to the extent we access capital markets to raise funds to support our business, such changes could affect the cost of such funds or the ability to raise such funds.
During 2025, the Federal Reserve implemented a series of rate cuts that decreased the target fed funds rate by 75 basis points. Although we have implemented procedures we believe will prepare us for the potential effects of changes in interest rates on our results of operations, these procedures may not always be successful.Although we have implemented procedures we believe will reduce the potential effects of changes in interest rates on our results of operations, these procedures may not always be successful. In addition, any substantial or prolonged change in market interest rates could affect our financial condition, results of operations and liquidity. In addition, any substantial or prolonged change in 13TABLE OF CONTENTSmarket interest rates could affect our financial condition, results of operations and liquidity.
Local economic factors may adversely affect our business and the results of our operations. Our community banking business model and local market focus has led to a concentration in the markets in which we operate, namely Indiana, Ohio, Kentucky and Illinois. As a result of this geographic concentration, our results of operations are largely dependent on economic conditions in these local markets. Changes to the economic conditions in these local markets, which may be different from the national economic conditions, may adversely affect our financial condition, results of operations, and business prospects.
Our loan portfolio and investments in mortgage-backed securities consist of a significant number of loans secured by real estate and other assets, the value of which can be affected by national and local market conditions. We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans and hold as investments a number of mortgage-backed securities, including collateralized mortgage obligations. Many of our loans are secured by real estate (both residential and commercial) within our market area. A major change in the real estate market, such as deterioration in the value of collateral, or in the local or national economy, could affect our customers' ability to pay these loans, which in turn could impact our results of operations and financial condition. Additionally, increases in unemployment also may affect the ability of certain clients to repay loans and the financial results of commercial clients in localities with higher unemployment, may result in loan defaults and foreclosures and may impair the value of our collateral. Increases in loan defaults may also lead to additional losses in our investments in mortgage-backed securities, including collateralized mortgage obligations.
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Loan defaults and foreclosures are unavoidable in the banking industry, and we try to limit our exposure to this risk by carefully adhering to our credit risk standards and actively and carefully monitoring our extensions of credit throughout the lifespan of a loan.
Classified asset balances increased $11.4 million, or 5.1%, to $235.5 million at December 31, 2025 from $224.1 million at December 31, 2024. The change in classified assets during 2025 included $20.4 million of loans rated substandard or worse acquired in the Westfield transaction. Absent the impact from Westfield, classified assets declined $9.0 million during 2025 as resolutions of classified assets outpaced downward credit migration during the period. Any increases in our classified asset balances and/or an increase in loan defaults may also increase our costs associated with servicing these loans, foreclosing on properties and costs of property maintenance on foreclosed properties. We cannot fully eliminate credit risk, and as a result, credit losses may increase in the future and impact our financial condition and results of operations.
Weakness in the secondary market for residential mortgage loans could affect our financial condition and results of operations.Weakness in the secondary market for residential mortgage loans could affect us. Declines in demand for residential mortgage loans, changed government laws or regulations or other disruptions in the secondary market for residential mortgage loans can limit the market for and liquidity of many mortgage loans that we seek to sell in the secondary market. The effects of these disruptions to the secondary market for residential mortgage loans, as well as reductions in residential real estate market prices and declining home sales, could affect the value of collateral securing mortgage loans that we hold, income generated from mortgage loan originations and profits on sales of mortgage loans in the secondary market. Such conditions could result in higher losses or charge-offs in our mortgage loan portfolio and other lines of business. Declines in real estate values, home sale volumes, financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors, either independently or in the aggregate could have further effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would affect our financial condition, results of operations, business and/or prospects. Declines in real estate values, home sale volumes, financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors could have further effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would affect our financial condition or results of operations. A decline in home values or overall economic weakness could also have an impact upon the value of real estate or other assets which we own upon foreclosing a loan and our ability to realize value on any subsequent sale of such assets.
Our financial instruments carried at fair value expose us to certain market risks. We maintain an available-for-sale investment securities portfolio, which includes assets with various types of instruments and maturities.We maintain an available-for-sale investment securities portfolio, which includes assets with various types of instruments and maturities. At times, we also maintain certain assets that are classified and accounted for as trading assets. The changes in fair value of available-for-sale securities are recognized in shareholders' equity as a component of other comprehensive income, and these securities typically decrease in value when market interest rates rise. The changes in fair value of available-for-sale securities are recognized in shareholders' equity as a component of other comprehensive income. The changes in fair value of financial instruments classified as trading assets are carried at fair value with changes in fair value recognized in earnings. The fair value of financial instruments carried at fair value is exposed to market risks related to changes in interest rates and market liquidity. We manage the market risks associated with these instruments through broad asset/liability management strategies. Changes in the market values of these financial instruments or conditions that would require us to dispose of these investment securities earlier than anticipated could have a material impact on our financial condition or results of operations. We may classify additional financial assets or financial liabilities at fair value in the future.
Risks Related to Our Business
When we loan money, commit to loan money or enter into a letter of credit or other contract with a counterparty, we incur credit risk, or the risk of loss if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their contracts. Since lending is one of our primary business activities, the credit quality of our portfolio can have a significant impact on our earnings.Since lending is one of our primary business activities, the credit quality of our portfolio can have a significant impact on our earnings. We estimate and establish reserves for credit risks we reasonably expect to occur over the expected life of our loan portfolio. This process, which is critical to our financial results and condition, requires difficult, subjective and complex judgments, including reviews of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. As is the case with any such assessments, there is always the chance that we will fail to identify the proper factors, that we will fail to accurately estimate the impacts of factors that we identify, or that we fail to accurately estimate the aggregate impacts of factors that we identify, all of which could impact the credit quality of our portfolio and have an impact on the results of operations. In addition, large loans, letters of credit and contracts with individual counterparties in our portfolio magnify the credit risk that we face, as the impact of large borrowers and counterparties not repaying their loans or performing according to the terms of their contracts has a disproportionately significant impact on our credit losses, reserves and the results of operations. Certain segments of commercial real estate, including office properties, continue to experience elevated vacancy rates and refinancing pressure, which may reduce collateral values and increase default risk.
The information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an effect on our financial condition, results of operations and business.14TABLE OF CONTENTSThe information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an effect on our business, results of operations and financial condition. In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on
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behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Nonetheless, in the near-term, sustained interest rates along with elevated costs are expected to weigh on firms’ profit margins. Nonetheless, in the near-term, high interest rates along with rising costs, particularly robust wage growth, are expected to weigh on firms’ profit margins. Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud. Moreover, such circumstances, including fraud, may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty. In addition, in cases where we have extended credit against collateral and/or guarantees, we may find that we are under-secured, for example, as a result of sudden declines in market values that reduce the value of collateral or due to fraud with respect to such collateral or the ability of a guarantor to fulfill its financial obligations. In addition, in cases where we have extended credit against collateral, we may find that we are under-secured, for example, as a result of sudden declines in market values that reduce the value of collateral or due to fraud with respect to such collateral. If such events or circumstances were to occur, it could result in a potential loss of revenue and increase in recovery costs which could have an effect on our financial condition, results of operations and business. If such events or circumstances were to occur, it could result in a potential loss of revenue and have an effect on our business, results of operations and financial condition.
Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio or may produce volatility in provision expense and earnings.Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio. We maintain an allowance for credit losses that we believe is a reasonable estimate of the expected losses over the expected life of the loan portfolio based on a CECL model as of the corresponding balance sheet date. We believe that our allowance for credit losses is maintained at a level adequate to absorb expected losses over the life of the loans in the loan portfolio as of the corresponding balance sheet date. However, our allowance for credit losses may not be sufficient to cover actual credit losses, and future provision for credit losses could materially affect our operating results. The accounting measurements related to the allowance for credit losses require significant estimates which are subject to uncertainty and change related to new information and changing circumstances.
Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. CECL estimates are sensitive to economic forecast assumptions, including unemployment, interest rates, and property valuations. Changes in forecasts may produce volatility in provision expense and earnings. We adjust our quantitative model, as necessary, to reflect conditions not already considered by such model. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowers’ abilities to successfully execute their business models through changing economic environments, competitive challenges and other factors. Because of the degree of uncertainty with respect to assumptions in our models and susceptibility of these factors to change, our actual losses may vary from our current estimates. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses may vary from our current estimates.
In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs. The accounting guidance requires banks to record, at the time of origination, credit losses expected throughout the life of the asset on loans, leases and held-to-maturity debt securities. The accounting guidance requires banks to record, at the time of origination, credit losses expected throughout the life of the asset on loans, leases and held-to-maturity debt securities, as opposed to the previous practice of recording losses when it was probable that a loss event had occurred. Under the CECL model, we are required to use historical information, current conditions and reasonable and supportable forecasts to estimate the expected credit losses. If the methodologies and assumptions we use in the CECL model prove to be incorrect, or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations.
As a result of CECL, our financial results may be negatively affected as soon as weak or deteriorating economic conditions are forecasted and alter our expectations for credit losses. In 2025, we recorded $36.5 million of provision expense on loans and leases due to net charge-offs and loan portfolio growth. In 2022, we recorded $6.7 million of provision expense as our loan portfolio grew and the overall duration of the portfolio extended due to rising interest rates. Depending upon future circumstances, as well as broader macroeconomic shifts, we may incur significant provision expense for credit losses in future periods.
Our foreign exchange business plays a crucial role in facilitating various financial transactions, including foreign exchange, interest rate, and commodity hedging for our commercial clients and is largely dependent upon a small number of large clients and market volatility that could adversely affect our financial condition, results of operations, and reputation.15TABLE OF CONTENTSOur foreign exchange business plays a crucial role in facilitating various financial transactions, including foreign exchange, interest rate, and soon commodity hedging for our commercial clients and is largely dependent upon a small number of large clients and market volatility that could adversely affect our financial condition, results of operations, and reputation. In August 2019, First Financial acquired Bannockburn, which engages in various capital markets activities as part of its matched book business encompassing foreign exchange, interest rate, and commodity hedging transactions.In August 2019, First Financial acquired Bannockburn, which engages in various capital markets activities as part of its matched book business encompassing foreign exchange, interest rate, and, coming in 2024, commodity hedging transactions.
•Concentration risk: Bannockburn’s business model relies, to some extent, upon a small number of large clients. The loss of one or more of these large clients would adversely affect the revenue derived from Bannockburn. Revenue concentration among a limited number of counterparties may make earnings from Bannockburn more volatile and we may see a negative impact on our financial condition or results of operations should we lose or see reduced activity from any of these large clients.
•Market risk: Foreign currency and commodities transactions expose us to market risk, including fluctuations in foreign exchange rates, interest rates, and commodity prices. These fluctuations could result in financial losses or decreased revenues or additional liquidity needs if we fail to accurately predict or manage these risks. These fluctuations could result in financial losses or decreased revenues if we fail to accurately predict or manage these risks. Foreign currency and commodities transactions historically increase as market volatility increases. Foreign currency transactions historically increase as market volatility increases. Sustained periods of stability in global financial markets could also adversely affect Bannockburn’s revenue.
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•Credit risk: We are exposed to credit risk through our dealings with counterparties in derivative transactions. While we have risk management policies and procedures in place to manage credit risk, the failure of counterparties to fulfill their obligations could lead to financial losses or damage to our reputation. While we have risk management policies and procedures in place to mitigate credit risk, the failure of counterparties to fulfill their obligations could lead to financial losses or damage to our reputation.
•Liquidity risk: The nature of our capital markets operations requires us to maintain sufficient liquidity to meet our obligations, including margin calls and settlement requirements. Sudden increases in collateral or margin requirements during periods of market volatility may create additional liquidity needs, which could strain our resources and negatively impact our financial position.
•Regulatory risk: Our capital markets activities are subject to extensive regulatory oversight and compliance requirements. Changes in regulations or regulatory enforcement actions could increase our compliance costs, restrict our ability to operate certain businesses, or result in fines or penalties.
•Operational Risk: We face operational risks, including systems failures, errors, or disruptions, that could disrupt our capital markets activities and result in financial losses or harm to our reputation.
•Legal risk: Our capital markets operations are subject to legal risks, including litigation, regulatory investigations, and disputes with clients or counterparties. Adverse legal outcomes could result in financial losses, reputational damage, or regulatory sanctions.
•Political risk: Our foreign exchange business is also susceptible to the risk that political events or changes in government policies, such as renegotiated trade agreements or tariffs, could negatively impact the bank's matched book business. For additional discussion related to political risks, please see the Risk Factor titled “Weakness in the economy and governmental policies, whether or not adopted in response to economic conditions such as inflation, may adversely affect us.”
•Currency Risk: Recent depreciation and volatility in the U.S. dollar have increased uncertainty in foreign exchange markets, which may affect transaction volumes, hedging activity, client demand, and the value of positions managed within Bannockburn’s matched book operations. Continued currency volatility or abrupt shifts in exchange rates could result in reduced revenues, valuation impacts, or increased liquidity and collateral requirements, adversely affecting our financial condition and results of operations.
We rely on other companies to provide key components of our business infrastructure, creating risks of failures or disruptions by such companies and cybersecurity incidents which may involve our customers’ information.We rely on other companies to provide key components of our business infrastructure, creating risks of failures by such companies and cybersecurity incidents involving our customers’ information. Digitalization and technological innovation continue to advance the trend of banks outsourcing technology operations and entering partnerships or other arrangements with third parties.Digitalization and technological innovation continue to advance the trend of banks outsourcing technology operations and banks entering partnerships or other arrangements with third parties. Third parties provide key components of our business infrastructure, such as processing and internet connections and network access. These vendors also provide services that support our operations, including the storage and processing of sensitive consumer and business customer data, as well as our sales efforts. Any disruption in such services provided by these third parties, any failure of these third parties to handle current or higher volumes or any failure of third parties to perform in accordance with their agreements with us could affect our ability to deliver products and services to clients and to efficiently and effectively conduct our business. Any disruption in such services provided by these third parties or any failure of these third parties to handle current or higher volumes could affect our ability to deliver products and services to clients and to efficiently and effectively conduct our business. Technological or financial difficulties of a third-party service provider could affect our business to the extent such difficulties result in the interruption or discontinuation of services provided by that party, and could lead to potential regulatory issues, reputational harm and impact the results of our operations. Technological or financial difficulties of a third-party service provider could affect our business to the extent such difficulties result in the interruption or discontinuation of services provided by that party.
In addition, a cybersecurity breach of a vendor's system may result in theft of our data or disruption of business processes. Increased use of artificial intelligence (AI) by vendors can further increase the risks of a cybersecurity breach, as discussed in the Risk Factor titled “The increased use and capacity of AI, Generative AI, large language models (LLMs), and AI agents by customers, vendors and competitors increases risks to our business.” A material breach of customer data security at a service provider's site may negatively impact our business reputation and cause a loss of customers, result in increased expense to contain the event and/or require that we provide credit monitoring services for affected customers, result in regulatory fines and sanctions, and possibly litigation. We may experience liability to our customers for losses arising from a breach of a vendor's data security system. We rely on our outsourced service providers to implement and maintain prudent cybersecurity controls. Furthermore, we may not be insured against all types of losses as a result of third-party failures, and our insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in our business infrastructure could interrupt our operations, cause reputational harm, increase the costs of doing business and impact the results of our operations. Failures in our business infrastructure could interrupt the operations or increase the costs of doing business. In certain cases, a limited number of vendors provide critical or specialized services, and disruption, pricing changes, financial stress, or service degradation at one of these providers could have a disproportionate impact on our operations. The Company’s business continuity and disaster recovery planning addresses disruption in critical vendors.
Unauthorized use or disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, or other breaches in the security of our systems could harm our business. As part of our business, we collect, process, and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties.As part of our business, we collect, process, and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties. Despite the security measures we have in place, our facilities and systems, and those of our third party service providers, may be vulnerable to security breaches, acts of fraud, acts of vandalism, computer viruses, malware, ransomware, theft of information, misplaced or lost data, programming and/or human errors, or other similar events. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of fraud, acts of vandalism, computer viruses, malware, ransomware, theft of information, misplaced or lost data, programming and/or human errors, or other similar events.
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Ransomware actors continue to affect the sector by targeting banks and their third parties. These attacks have the potential to affect banks and market operations by rendering critical data inaccessible as well as by threatening the confidentiality of customer data obtained by these bad actors or through data leaks. If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others. Our systems can be rendered inoperable, resulting in our inability to provide service to our customers. Any security breach involving the misappropriation, loss, destruction or unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, lead to a loss of customers, expose us to the risk of litigation and liability, result in regulatory fines, penalties, or orders, disrupt our operations and have a material effect on our business, our financial condition and the results of our operations. Any security breach involving the misappropriation, loss, destruction or unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations and have a material effect on our business.
Cybersecurity risk management programs are expensive to maintain and mitigate cybersecurity risks, but will not protect us from all risks associated with maintaining the security of customer data and our proprietary data from external and internal intrusions, disaster recovery and failures in the controls used by our vendors. Employee error or misconduct may result in failure to implement policies and procedures designed to avoid risks. Moreover, as technology and cyberattacks change over time, we must continually monitor and change systems to guard against new threats, while also training our employees to remain diligent against cyberattacks. Moreover, as technology and cyberattacks change over time, we must continually monitor and change systems to guard against new threats. We may not know of and be able to guard against a new threat until after an attack has occurred. Congress and the legislatures of states in which we operate regularly consider legislation that would impose more stringent data privacy requirements which may result in increased costs of compliance and impact the results of our operations. Congress and the legislatures of states in which we operate regularly consider legislation that would impose more stringent data privacy requirements.
Any of these occurrences could result in our diminished ability to operate one or more of our businesses, potential civil liability, reputational damage and regulatory intervention in the form of requirements, restrictions and penalties, which could affect our financial condition, results of operations and business.Any of these occurrences could result in our diminished ability to operate one or more of our businesses, potential liability to clients, reputational damage and regulatory intervention in the form of requirements, restrictions and penalties, which could affect us our business and results of operations.
We rely on our systems, employees and certain counterparties, and certain failures or actions could affect our operations. We rely on our systems, employees and certain counterparties, and certain failures could affect our operations.
We are exposed to many types of operational risks, some of which are outside of our control, including, but not limited to, the risk of fraud or theft by employees and outsiders, clerical and record-keeping errors, computer/telecommunications systems malfunctions, and risks regarding the operations of our third party vendors. Our business is dependent on our ability to process a large number of increasingly complex transactions. If any of our financial, accounting or other data processing or technological systems fail or have other significant shortcomings, our business could be affected. If any of our financial, accounting or other data processing systems fail or have other significant shortcomings, we could be affected. We depend on internal systems and outsourced technology to support these data storage and processing operations, as well as harm our reputation amongst our customers. We depend on internal systems and outsourced technology to support these data storage and processing operations. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood a bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process and/or communicate information about transactions. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. These, and similar types of attacks and/or breaches of data, could result in losses in the form of lost revenues, costs to remediate, reputational harm, litigation losses and other impacts to our financial condition and results of operations.
Additionally, we could be affected if one of our employees or a third-party service provider causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are also at risk of an impact on our systems and operations from natural disasters, accidents outside of our control, terrorism, international hostilities, and other exceptional or outlier events outside of our control. We are also at risk of an impact on our systems and operations from natural disasters, terrorism, and international hostilities. Increasing electricity demand, including from data centers and industrial activity, is placing pressure on regional power grid operators, including PJM Interconnection LLC, which serves many of the markets in which we operate, and prolonged or widespread power disruptions could adversely affect our facilities, third-party service providers, customers, and business continuity. Such events can impact operational systems operated by us or others on which we rely and can result in an impact to our business operations and subsequent impacts to our financial condition and results of operations.
In addition, continuing cyberattacks and current geopolitical tensions highlight the importance of heightened threat monitoring and safeguarding against disruptive attacks targeting the financial sector. In addition, continuing cyberattacks and current geopolitical tensions highlight the importance of heightened threat monitoring and safeguarding against disruptive attacks targeting the financial sector. There have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. There have also been increased instances of scammers who target and socially engineer clients to gain access to their accounts to conduct transactions or induce customers to authorize fraudulent transactions for the scammers’ benefit. Although we have commercially reasonable policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers. Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers. AI tools may also be utilized by bad actors to increase the sophistication and speed of cyberattacks and fraud attempts. For more information on the risks associated with AI, see the Risk Factor titled “The increased use and capacity of AI, Generative AI, large language models (LLMs), and AI agents by customers, vendors and competitors increases risks to our business.”
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The fraudulent activity and cybersecurity risks can result in financial liability and litigation risk to us and/or our customers, as well as harm to our reputation and negative impacts on our financial condition, results of our operations, business and prospects.
The increased use and capacity of AI, Generative AI, large language models (LLMs), and AI agents by customers, vendors and competitors increases risks to our business. The use and capacity of AI, Generative AI, LLMs and AI agents has increased in the past year and is being employed by customers, competitors, and vendors at increased rates. Many of these tools can increase cybersecurity risks, require specific technical expertise to operate, or expose information through open source code. These tools are being used by parties in various capacities, and employing these tools without sufficient knowledge or expertise of the power and risks associated with the tools can increase risks for the users. These tools are relatively new and there is potential of continued and/or increased adoption of legal and regulatory frameworks governing the use of these tools, by law, our primary banking regulators, other federal or state regulatory bodies, or other self-regulatory organizations.
The use of these tools by customers can increase the risk of exposure to their personal information and/or banking credentials which can result in increased opportunities for bad actors to initiate fraudulent activity with respect to a customer’s account(s). While we have implemented commercially reasonable policies and procedures to protect against fraudulent activity on the accounts of our customers, we cannot assure that such policies and procedures will prevent all fraudulent activity or capture activity that has been inadvertently been authorized by the customer. Such activity can result in financial liability and litigation risk to us and/or our customers, as well as harm to our reputation and negative impacts on our financial condition, results of our operations, business and prospects.
The use of these tools by vendors engaged by us can increase the risk of unauthorized use or disclosure of sensitive or confidential client or customer information and cyberattacks. Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or our market area. In conducting due diligence of our vendors, we request detailed information regarding how the vendor uses these tools and attempt to mitigate risks related to exposure by agreement with vendors. While these processes seek to mitigate risks associated with vendor use of these tools, we cannot eliminate this risk. Vendors may employ tools without realizing the risks associated with the tools, may have employees that use unauthorized technology tools that were not disclosed to us during our diligence process, or the tools that were disclosed may implement new services, features, or technologies that increase the exposure to cybersecurity risks. If a vendor engaged by us experienced a cyberattack related to use of these tools, or deliberately or inadvertently exposed sensitive or confidential client or customer information, we may experience financial liability and litigation risk to us and/or our customers, as well as harm to our reputation and negative impact on our financial condition, results of operations and business. Additionally, if any vendors incur additional costs related to any legal or regulatory framework adopted governing the use of such tools, we may face increased costs to engage such vendor, which could impact or financial condition and results of operations if we continue to use such vendor or as a result of costs incurred to find an alternative vendor.
The use of these tools by competitors may impair our ability to attract or retain business if our competitors are successful in their implementation. Failure to keep pace with these evolving technologies can have a negative impact on our financial condition, results of operations, business and prospects. In addition, if our competitors suffer any reputational harm as a result of the implementation of these evolving technologies, it could have a negative effect on the financial services industry as a whole and have a negative impact on our financial condition, results of operations, business and prospects. The increased use of these tools by competitors may also increase pressure to impose legal or regulatory frameworks regarding these tools, which could impact the financial services industry as a whole and cause us to incur increased costs to comply with such legal or regulatory frameworks, which may result in a negative impact on our financial condition, results of operations and business.
Our liquidity is dependent upon our ability to receive dividends from our subsidiaries, which accounts for most of our revenue and could affect our ability to pay dividends, and we may be unable to provide liquidity from other sources. We are a separate and distinct legal entity from our subsidiaries, notably the Bank.We are a separate and distinct legal entity from our subsidiaries, notably the Bank. We receive substantially all of our revenue from dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our common shares and interest and principal on outstanding debt. Various federal and/or state laws and regulations limit or restrict the amount of dividends that the Bank and certain of our non-bank subsidiaries may pay us. Additionally, if our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not be able to make dividend payments to our common shareholders. As of December 31, 2025, the Bank had $193.6 million available to pay dividends to First Financial without prior regulatory approval.
To enhance liquidity, we may borrow under credit facilities or from other sources.17TABLE OF CONTENTSTo enhance liquidity, we may borrow under credit facilities or from other sources. Turbulence in the capital and credit markets may cause many lenders and institutional investors to reduce or cease to provide funding to borrowers and, as a result, we may not be able to further increase liquidity through additional borrowings under these market conditions.
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Limitations on our ability to receive dividends from our subsidiaries or an inability to increase liquidity through additional borrowings, or inability to maintain, renew or replace existing credit facilities, could have a material effect on our liquidity and on our ability to pay dividends on our common shares and interest and principal on our debt.
As of December 31, 2025, we had indebtedness of $1.2 billion which was an increase from $1.1 billion in 2024. This increase was primarily a result of the Company's overall balance sheet management strategies subsequent to the Westfield acquisition. If deposits were to decrease, we may need to incur additional indebtedness to ensure that we have adequate levels of liquidity.
Clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding. Checking and savings account balances and other forms of client deposits, including uninsured deposits, could decrease if clients perceive alternative investments as providing superior expected returns.Checking and savings account balances and other forms of client deposits, including uninsured deposits, could decrease if clients perceive alternative investments as providing superior expected returns. Increased competition from money market funds and alternative investment vehicles may decrease our deposit balances and increase our funding costs. We regularly perform liquidity stress testing and sensitivity analyses of deposit assumptions. We regularly perform liquidity tress testing and sensitivity analyses of deposit assumptions. Both remain critical given recent trends in deposit balance and interest rate movements, as well as uncertainty regarding depositor behavior moving forward.
Digital banking has accelerated deposit mobility and increased liquidity risk. Consumers may move money out of bank deposits in favor of other investments, including digital assets or cryptocurrency or money market funds, or into alternative financial services providers with limited friction in moving assets. When clients move money out of bank deposits in favor of alternative investments or to alternative financial services providers, we can lose a relatively inexpensive source of funds, increasing our funding costs, and impacting the results of our operations. When clients move money out of bank deposits in favor of alternative investments, we can lose a relatively inexpensive source of funds, increasing our funding costs. Recent industry events have demonstrated that deposit balances, particularly uninsured and digitally accessible deposits, can move rapidly during periods of market stress, requiring banks employ risk mitigation strategies to handle any increased liquidity pressures. Sound liquidity risk management, including processes that ensure sufficient committed capacity to meet contingent liquidity needs, remains critical.
Our financial condition, results of operations, and stock price may be negatively impacted by unrelated bank failures and negative depositor and/or investor confidence in depository institutions. The 2023 bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California, and the decision of Silvergate Bank in California to voluntarily liquidate its assets and wind down operations have caused uncertainty in the investor community and negative confidence among bank customers generally. While we do not believe that the circumstances of these banks' failures and liquidations are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a lasting negative reputational ramification for the financial services industry, including us. These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions, which in turn led to a greater focus by institutions, investors, and regulators on the on-balance sheet liquidity of and funding sources for financial institutions and the composition of its deposits. These bank failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions, which in turn led to a greater focus by institutions, investors, and regulators on the on-balance sheet liquidity of and funding sources for financial institutions and the composition of its deposits. Notwithstanding, our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention, and other related matters, our financial condition, results of operation, and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events. Notwithstanding, our efforts to promote deposit insurance coverage with our customers and otherwise effectively manage our liquidity, deposit portfolio retention, and other related matters, our financial condition, results of operation, and stock price may be adversely affected by future negative events within the banking sector and adverse customer or investor responses to such events.
Disruptions in our ability to access capital markets on desirable terms may affect our capital resources, liquidity and business. We depend on wholesale capital markets to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, and to accommodate the transaction and cash management needs of our clients.We depend on wholesale capital markets to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, and to accommodate the transaction and cash management needs of our clients. Other sources of funding available to us, and upon which we rely as regular components of our liquidity risk management strategy, include inter-bank borrowings, repurchase agreements, and borrowings from the Federal Home Loan Bank system. Any occurrence that may limit our access to these sources on acceptable or desirable terms, such as a decline in the confidence of debt purchasers, a downgrade in our credit rating or a downgrade in the credit rating of our depositors or counterparties participating in the capital markets, may affect our capital costs and our ability to raise capital and, in turn, our liquidity. Any occurrence that may limit our access to these sources on acceptable or desirable terms, such as a decline in the confidence of debt purchasers, a downgrade in our credit rating, or a downgrade in the credit rating of our depositors or counterparties participating in the capital markets, may affect our capital costs and our ability to raise capital and, in turn, our liquidity.
In addition, prior debt offerings could potentially have important consequences to us and our debt and equity investors, including:
•requiring a substantial portion of our cash flow from operations to make interest payments;
•making it more difficult to satisfy debt service and other obligations;
•increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;
•increasing our vulnerability to general adverse economic and industry conditions;
•reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;
•limiting our flexibility in planning for, or reacting to, changes in our business and the industry;
•placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and
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•limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase securities.
Projections for new business initiatives and strategies may prove inaccurate. Projections for new business initiatives and strategies may prove inaccurate. The introduction, implementation, withdrawal, success and timing of business initiatives and strategies, including, but not limited to, the opening of new banking centers or entering into new product lines, may be less successful or may be different than anticipated, which could affect our business, financial condition and the results of our operations.The introduction, implementation, withdrawal, success and timing of business initiatives and strategies, including, but not limited to, the opening of new banking centers or entering into new product lines, may be less successful or may be different than anticipated, which could affect our business. The Bank makes certain projections and develops plans and strategies for its banking and financial products. The Bank makes certain projections and develops plans and strategies for its banking and financial products. If we do not accurately forecast demand for our banking and financial products or if technology conversion challenges and/or customer attrition risks delay realization of expected benefits from acquisitions or branch purchases, it could result in us incurring significant expenses without the anticipated increases in revenue, which could result in a material effect on the Bank’s business, capital, and/or results of our operations.
We may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or certain borrower defaults, which could harm our liquidity, results of operations and financial condition. When we sell mortgage loans, whether as whole loans or pursuant to a securitization, we are required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated.When we sell mortgage loans, whether as whole loans or pursuant to a securitization, we are required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. Our whole loan sale agreements require us to repurchase or substitute mortgage loans in the event we breach any of these representations or warranties including those that are breached as a result of misrepresentations or fraud by the borrowers. Our whole loan sale agreements require us to repurchase or substitute mortgage loans in the event we breach any of these representations or warranties. While we have taken steps to enhance our underwriting policies and procedures to protect against breaches of these representations and warranties in subsequent sales of mortgage loans, there can be no assurance that these steps will be effective or reduce risk associated with loans sold in the past. While we have taken steps to enhance our underwriting policies and procedures, there can be no assurance that these steps will be effective or reduce risk associated with loans sold in the past. If the level of repurchase and indemnity activity becomes material, our liquidity, results of operations and financial condition may be affected.
Competition in the financial services industry is intense and could result in our losing business and/or experiencing reduced margins. We operate in a highly competitive industry that could become even more competitive as a result of legislative, regulatory and technological changes, including AI, Generative AI, LLMs and AI agents, and continued consolidation. We face aggressive competition from other domestic and foreign lending institutions as well as from numerous other providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. These developments may significantly change the competitive environment in which we conduct business.
Some of our competitors have greater financial resources and/or face fewer regulatory constraints, such as FinTechs, digital assets or cryptocurrencies. FinTechs and other new technologies seek to complete financial transactions without banks or by utilizing banks that are not dependent on having physical branches in a customer’s market area, or embed financial services into non-bank platforms which could reduce customer reliance on traditional banking services. FinTechs have also begun seeking commercial bank or industrial loan company charters, or are actively seeking to acquire commercial banks or industrial loan companies to further compete with traditional banking services. The rise in technological advances in the financial services industry has led to simpler opportunities for consumers to shop for higher deposit interest rates at banks across the country, which may offer higher rates because they have few or no physical branches and open deposit accounts electronically. The banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of specific banking or consumer finance law.
Further, in 2025, the United States passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”), which provides a regulatory framework for the issuance and adoption of stablecoins in the United States. The passage of the GENIUS Act may result in increased competition from issuers of stablecoins and providers of related technology, as well as non-bank competitors and financial institutions that offer to hold stablecoin reserve assets or custody stablecoins.
In addition to non-bank competitors, we face competition from within the traditional financial services industry. Credit unions that compete with us have tax, regulatory and other advantages that allow them to price products and services more competitively. Credit unions that compete with us have regulatory and other advantages that allow them to price products and services more competitively. Competing banks may have greater financial resources and/or face fewer regulatory constraints. Competing banks may also be more successful in implementing new technologies or developing or launching new products or services. As a result of these various sources of competition, we could lose loan, deposit, or other types of business to competitors or be forced to price products and services on less advantageous terms to retain or attract clients, either of which could affect our profitability.
Failure to adequately address the competitive pressures we face could make it harder for us to attract and retain customers across our businesses.19TABLE OF CONTENTSFailure to adequately address the competitive pressures we face could make it harder for us to attract and retain customers across our businesses. Similarly, meeting these competitive pressures could require us to incur significant additional expense, to reevaluate the number of branches through which we serve our customers, or to accept risk beyond what we would otherwise
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view as desirable under the circumstances. In addition, in our interest rate sensitive business, pressure to increase rates on deposits or decrease rates on loans could reduce our net interest margin with a resulting negative impact on our net interest income. In addition, in our interest rate sensitive business, pressure to increase rates on deposits or decrease rates on loans could reduce our net interest margin with a resulting negative impact on our net interest income. These competitive pressures could result in the loss of fee income and client deposits, increase our funding costs and impact our financial condition and results of our operations. This competition could lead to adverse effects on our business, financial condition, or operating results and could also cause us to not pursue certain business opportunities.
Failure to keep pace or successfully adopt new technologies could adversely affect the results of our operations. In addition to the new products and services that new technologies, including digital or cryptocurrencies, blockchain and other “fintech” technologies, bring to customers, successful adoption and implementation of new technologies can allow us to increase efficiencies and enable us to better serve customers in a more efficient manner at reduced costs.
We may undertake additional costs to implement new technologies. Our success depends in part on recognizing the potential of new technology that can be implemented to achieve these benefits. If we are not successful in implementing the new technologies, or otherwise do not realize the intended efficiency and cost benefits of the implementation of new technologies, we may be unable to recover the costs incurred during the implementation.
Additionally, implementation of certain new technologies, such as AI, Generative AI, LLMs, AI agents and similar technologies, can expose us to new or increased operational risks, including risks related to data leakage, model bias, decision errors, regulatory non-compliance, or ineffective governance or internal controls. The implementation of these new technologies may have unintended consequences due to their limitations or failure to use and implement them effectively. Further, many of our competitors have greater resources to develop these and other new technologies without reliance on third party vendors or developers, which can reduce their costs and exposure to third party risks, which could put us at a competitive disadvantage. For more information on the risks associated with these new technologies, see the Risk Factor titled “The increased use and capacity of AI, Generative AI, large language models (LLMs), and AI agents by customers, vendors and competitors increases risks to our business.”
Failure to attract and/or retain key employees could impact our business operations. Another increasingly competitive factor in the financial services industry is the competition to attract and retain talented employees across many of our business and support areas, many of whom are key to executing our strategic plan and to maintaining relationships with the customers and communities they serve.Another increasingly competitive factor in the financial services industry is the competition to attract and retain talented employees across many of our business and support areas, many of whom are key to executing our strategic plan and to maintaining relationships with the customers and communities they serve. We face competition for talented employees not only by others in the financial services industry, but across sectors and geographic locations, as technological advancements have made it easier for employees to pursue opportunities that previously were inaccessible because of geographical restrictions. Failure to attract and/or retain key employees, or otherwise experiencing persistent or extreme levels of employee turnover, could lead to adverse effects on our business, financial condition or operating results and could also cause us to not pursue certain business opportunities.
Our wealth management business subjects us to a variety of investment and market risks. At December 31, 2025, we had $3.9 billion in assets under management.At December 31, 2023, we had $3.5 billion in assets under management. A sharp decline or heightened volatility in the stock market could negatively impact the value of investments held by the bank's wealth management clients, which in turn impacts the amount of assets under management and subjects our earnings to additional risks and uncertainties. As our wealth management business grows, we may also face operational risk resulting from inadequate or failed internal processes, systems or errors, and regulatory risk, which could result in penalties or restrictions due to non-compliance with laws and regulations.
Additionally, many of the same technological advances that compete with our banking services may compete with our wealth management business. Some of our competitors have greater financial resources and/or face fewer regulatory constraints, such as FinTechs, that allow customers trade investments without the use of wealth management services. Some of our competitors have greater financial resources and/or face fewer regulatory constraints, such as Financial Technology Companies, or FinTechs. Further, customers are seeking to invest in the cryptocurrency markets which may also reduce our assets under management. These competitive factors could further impact the amount of assets under management, decrease our earnings, increase costs to address competitive pressures and impact our financial condition and the results of our operations.
Negative public opinion could damage our reputation and impact business operations and revenues. As a financial institution, our earnings and capital are subject to risks associated with negative public opinion.As a financial institution, our earnings and capital are subject to risks associated with negative public opinion. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, the failure of any of our products or services to meet our clients’ expectations or applicable regulatory requirements, corporate governance and acquisitions, social media and other marketing activities, the acts, comments, or statements made by employees or third parties we have engaged, whether individually or on behalf of us, and the implementation of environmental, social and governance practices or actions taken by government regulators and community organizations in response to any of the foregoing. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, the failure of any of our products or services to meet our clients’ expectations or applicable regulatory requirements, corporate governance and acquisitions, social media and other marketing activities, and the implementation of environmental, social and governance practices or actions taken by government regulators and community organizations in response to any of the foregoing. Negative public opinion could affect our ability to attract and/or retain clients, attract and/or retain employees, could expose us to litigation and/or regulatory action, and could have a material adverse effect on the results of our operations, our stock price or result in heightened volatility. Negative public opinion could also affect our ability to borrow funds in the unsecured wholesale debt markets.
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We may not pay dividends on our common shares. Holders of our common shares are only entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments.Holders of our common shares are only entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our common shares, we are not required to do so and may reduce or eliminate our common share dividend in the future. Additionally, our funds to pay dividends on common shares are dependent upon the results of operations and dividends paid to us by the Bank, which are subject to regulatory restrictions. Additionally, our funds to pay dividends on common shares are dependent upon dividends paid to us by the Bank, which are subject to regulatory restrictions. A reduction in our dividend rate could affect the market price of our common shares.
Significant or sustained declines in our current market capitalization could impact the carrying value of our goodwill. Numerous facts and circumstances are considered when evaluating the carrying value of our goodwill.Numerous facts and circumstances are considered when evaluating the carrying value of our goodwill. One of those considerations is our market capitalization, which is evaluated over a reasonable period of time and compared to the aggregate estimated fair value of the reporting unit. While this comparison provides some relative market information regarding the estimated fair value of our reporting unit, it is not determinative and needs to be evaluated in the context of the current economic and political environment. However, significant and/or sustained declines in First Financial’s market capitalization, especially in relation to First Financial’s book value, could be an indication of potential impairment of goodwill.
Other considerations that factor into the aggregate estimated fair value of the reporting unit include forecasts of revenues and expenses derived from internal management projections for a period of five years, changes in working capital estimates, company specific discount rate derived from a rate build up approach, externally sourced bank peer group market multiples and externally sourced bank peer group change in control premium, all of which are highly subjective and require significant management judgment. Changes in these key assumptions could materially affect our estimate of the reporting unit fair value and could affect our conclusion regarding the existence of potential impairment of goodwill.
A reduction in our credit rating could affect us or the holders of our securities.20TABLE OF CONTENTSA reduction in our credit rating could affect us or the holders of our securities. The credit rating agencies assessing our creditworthiness regularly evaluate us, and provide a credit rating. Credit ratings are based on a number of factors, including our financial strength and ability to generate earnings, as well as factors not entirely within our control, including changes in rating methodologies and conditions affecting the financial services industry and the economy as a whole. There can be no assurance that we will maintain our current credit rating. A downgrade of the credit rating of the Company could affect our access to liquidity and capital, and could significantly increase our cost of funds, trigger additional collateral or funding requirements and decrease the number of investors and counterparties willing to lend to us or purchase our securities. This could affect our growth, profitability, financial condition, including liquidity, and the results of our operations. This could affect our growth, profitability and financial condition, including liquidity.
Potential acquisitions may disrupt our business and dilute shareholder value, we may not be able to successfully consummate or integrate such acquisitions, and we may not realize the anticipated benefits contemplated when pursuing a potential acquisition.Potential acquisitions may disrupt our business and dilute shareholder value, and we may not be able to successfully consummate or integrate such acquisitions. We may acquire other financial institutions, or branches or assets of other financial institutions, in the future.We may acquire other financial institutions, or branches or assets of other financial institutions, in the future. We may also open new branches and enter into new lines of business or offer new products or services either through organic expansion, mergers, acquisitions or similar corporate transactions. We may also open new branches and enter into new lines of business or offer new products or services. These risks and uncertainties are present in the acquisitions and subsequent integration into First Financial of Westfield Bancorp and Westfield Bank; and BankFinancial Corporation and BankFinancial, National Association. Any such expansion of our business will involve a number of expenses and risks, which may include:
•the time and expense associated with identifying and evaluating potential expansions, including the ability to conduct due diligence and the access to information discovered during the due diligence process;
•the potential inaccuracy of estimates, judgments, and assumptions used to evaluate credit, operations, management and market risk with respect to the target company;
•potential exposure to unknown or contingent liabilities of the target company;
•exposure to potential asset quality issues of the target company;
•difficulty and expense of integrating the operations and personnel of the target company;
•difficulty or added costs in the wind-down of non-strategic operations;
•a target specific risk that the acquisition target faces that is specific to its business, industry, or market area and its impact to the success of the transaction;
•potential disruption to our business;
•potential diversion of our management’s time and attention;
•the possible loss of key employees and customers of the target company;
•difficulty in estimating the value (including goodwill) of the target company;
•difficulty in receiving appropriate regulatory approval for any proposed transaction or the denial of such approval;
•potential increased costs or time required to complete an acquisition may be substantially greater or longer than anticipated;
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•the potential risks related to any transactions involving intellectual property, and the extent to which such intellectual property is utilized or protected in the transaction;
•challenges faced when integrating a target into First Financial related to differences in policies and procedures, utilization of systems, details and comprehensiveness of data integration, and the integration of new employees;
•potential changes in banking, tax or other laws or regulations or accounting rules that may affect the target company or our realization of any anticipated benefits or accretive shareholder value from undertaking such expansion; and
•litigation risk.
We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. Acquisitions could involve the payment of a premium over book and market values, and, therefore, dilution of our tangible book value and net income per common share may occur in connection with any such transaction. Furthermore, any difficulty integrating businesses acquired as a result of a merger or acquisition and the failure to realize the expected revenue increases, cost savings, increases in geographic or product presence and/or other projected benefits from an acquisition could have an impact on our liquidity, results of operations and financial condition and any such integration could divert management’s time and attention from managing our company in an effective manner.
Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval or other closing conditions. We may expend substantial time and resources pursuing potential acquisitions which may not be consummated because regulatory approval or other closing requirements are not satisfied. Additionally, the banking regulators and applicable laws and regulations may restrict our ability to engage in acquisitions under certain circumstances.
Our accounting policies and processes are critical to how we report our financial condition and results of operations. They require management to make estimates about matters that are uncertain. Accounting policies and processes are fundamental to how we record and report our financial condition and results of operations.Accounting policies and processes are fundamental to how we record and report our financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and processes so they comply with U.S. GAAP.
Management has identified certain accounting policies as being critical because they require management’s judgment to ascertain the valuations of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate valuation that is made when recording income, recognizing an expense, recovering an asset, valuing an asset or liability or reducing a liability. We have established detailed policies and control procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, our policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Because of the uncertainty surrounding our judgments and the estimates pertaining to these matters, we cannot guarantee that we will not be required to adjust accounting policies or re-state prior period financial statements. Because of the uncertainty 21TABLE OF CONTENTSsurrounding our judgments and the estimates pertaining to these matters, we cannot guarantee that we will not be required to adjust accounting policies or re-state prior period financial statements.
See the “Critical Accounting Estimates” in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1- Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, in our 2025 Annual Report to Shareholders (included within Exhibit 13 to this Form 10-K) for more information.
Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition. From time to time, the FASB, SEC and other regulatory agencies may change the financial accounting and reporting guidance that governs the preparation of our financial statements.From time to time, the FASB, SEC and other regulatory agencies change the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially impact how we manage, record and report our financial condition and results of operations. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in a requirement to restate prior period financial statements. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934 ("Exchange Act") is accurately accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934 (Exchange Act) is accurately accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of management's system of controls are met.
These inherent limitations include the realities that judgments in decision making can be faulty, that alternative reasoned judgments can be drawn, that some information may be reported inaccurately because we must specifically rely upon the person providing such information or that breakdowns can occur because of a simple error or mistake.These inherent limitations include the realities that judgments in decision making can be faulty, that alternative reasoned judgments can be drawn, or that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in management's system of controls, misstatements due to error or fraud may occur and not be detected.
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Our revenues derived from investment securities may be volatile and subject to a variety of risks. We generally maintain investment securities and trading positions in the fixed income markets.We generally maintain investment securities and trading positions in the fixed income markets. Unrealized gains and losses associated with our investment portfolio and mark-to-market risks associated with our investment portfolio are affected by many factors, including our credit position, interest rate volatility and volatility in capital markets, among other economic factors. Unrealized gains and losses associated with our investment portfolio and mark to market gains and losses associated with our investment portfolio are affected by many factors, including our credit position, interest rate volatility and volatility in capital markets, among other economic factors. Our return on such investments could experience volatility, and such volatility may affect our financial condition and results of operations. If we were required to liquidate our holdings in these investment securities and/or exit positions prior to maturity or prior than we had anticipated, it could result in losses and may affect our financial condition and results of operations. Additionally, accounting regulations may require us to record a charge prior to the actual realization of a loss when market valuations of such securities are impaired and such impairment is considered to be other than temporary.
We also have investments in mortgage backed securities, including collateralized mortgage obligations. These securities are participations in pools of loans secured by mortgages under which payments of principal and interest are passed through to security holders. These securities are subject to prepayment risk, particularly during periods of declining interest rates, and extension risk during periods of rising interest rates. Prepayments of the underlying real estate loans may shorten the lives of the securities, thereby affecting yields to maturity and market values.
During 2025, the Company realized $22.3 million of losses on investment securities, compared to $22.6 million in 2024. The repositioning of a portion of the investment portfolio accounted for losses of $6.5 million and $13.2 million in 2025 and 2024, respectively, while impairment write-downs on securities with credit deterioration accounted for $8.1 million of losses in 2025 and $9.7 million in 2024. While we do not expect these losses to continue in 2026, these losses are an example of losses experienced as a result of volatility in revenues derived from investment securities.
Sales of our securities, or the perception of such sales, by us or holders of our securities in the public market or otherwise could cause the market price of our securities to decline and issuances under additional registration statements would dilute the interest of our shareholders and likely present other risks. The issuance or sale of our securities in public markets or otherwise, or the perception that such sales may occur, could impact the prevailing market price or demand of our securities. These sales, or the possibility that these sales may occur, also might make it more difficult to issue securities in the future at a time and at a price that we deem appropriate. Further resales of our securities may cause the market price of our securities to drop, even if our business is doing well.
The market price of our common stock could decline if holders of our shares sell those shares, including pursuant to a resale registration statement, or the market anticipates such sale by holders. As such, substantial sales of our common stock could occur at any time. Such sales, or the perception or anticipation of such sales, could reduce the demand and market price of our common stock.
On November 5, 2025, we filed an automatic shelf registration statement on Form S-3ASR for the issuance of an indeterminate amount of debt securities, capital stock, depositary shares, warrants, rights, stock purchase contracts, and units or a combination thereof. On November 10, 2025, we issued and sold $300.0 million aggregate principal amount of 6.375% Fixed-to-Floating Rate Subordinated Notes due 2035 (the “Subordinated Notes”) under the November 5, 2025 automatic shelf registration statement on Form S-3ASR. We have not issued any other securities under this automatic shelf registration statement.
The issuances and sales of our securities described herein may increase the volatility of the market price of our common stock. The sale by holders who were issued common stock, or the perception that these holders will sell the common stock, could result in a decline in the public trading price of our common stock. The issuance of our Subordinated Notes may decrease the demand for our common stock, as holders who purchased the Subordinated Notes may no longer be buyers of our common stock or may consider diversifying their holdings of us by selling shares of our common stock. Additionally, the issuances of these securities may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise with effect to sales.
Risks Related to the Legal and Regulatory Environment
We operate in a highly regulated industry and compliance with regulations and/or regulatory actions could impact the results of our operations. We, as well as our subsidiaries, are subject to the supervision and regulation of various state and federal regulators, including the Federal Reserve Board, the FDIC, the SEC, the CFPB, the Financial Industry Regulatory Authority, and ODFI.First Financial and its subsidiaries are subject to the supervision and regulation of various state and federal regulators, including the Federal Reserve Board, the FDIC, the SEC, the CFPB, the Financial Industry Regulatory Authority, and the ODFI. As such, we are subject to a wide variety of state and federal laws and regulations that require compliance of a complex and evolving regulatory framework. This includes, among others, capital adequacy requirements, Anti-Money Laundering and Bank Secrecy Act compliance, consumer protection laws and data privacy laws. As part of their supervisory
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process, which includes periodic examinations and continuous monitoring, the regulators have the authority to impose restrictions or conditions on our activities and the manner in which we operate our business. These actions could impact the Company and the Bank in a variety of ways, including subjecting us to fines, restricting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to offer certain products or services, requiring us to undertake significant remedial measures, removing key employees from their positions, imposing additional capital, operating, or oversight requirements or ultimately, in the event that any regulatory violations or actions cannot be corrected and are substantial in nature to cause an imminent risk of loss to depositors, we could be placed into receivership or conservatorship. These actions could impact the Company and the Bank in a variety of ways, including subjecting us to fines, restricting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to offer certain products or services, or imposing additional capital, operating, or oversight requirements. Additionally, investigations and/or actions by regulatory agencies against us could cause us to devote significant time and resources to defending our business and/or modifying our practices and operations and may lead to penalties or fines that materially affect us and our shareholders. These regulatory inquiries, investigations, examinations and actions ultimately could have an adverse effect on our reputation, lead to increased costs and impact our financial condition and the results of our operations.
Regulations related to information security, data protection and data privacy could expose us to regulatory risks, civil liabilities and increase our costs. We are subject to a variety of data protection, information security and data privacy laws, which includes the implementation of security procedures, processes and procedures to safeguard against the unauthorized use of consumer information and data breach notification obligations. Compliance with these laws has required us to undertake costs, devote personnel and implement processes and procedures to ensure compliance. While we have implemented processes and procedures designed to ensure compliance with these laws and regulations, there is still the possibility of non-compliance. Our failure to comply with data protection, information security and data privacy laws could result in potentially material regulatory and/or governmental investigations, actions, litigation, fines, sanctions and reputation harm, as well as costs incurred in responding to inquiries related to these laws, which could have an impact on our financial condition and results of operations.
State and federal regulators continue to revise and/or adopt legislation regarding information security, data protection and data privacy. Revised and/or new legislation related to information security, data protection and data privacy can result in increased costs of compliance for us and impact our financial condition and results of operations.
The regulations under which we operate are subject to change, which could result in restrictions and requirements that could detrimentally impact the results of our operations. Because we operate in a highly regulated industry, we may be required to adapt our processes and operations may be required and modify the way we conduct business to comply with regulatory requirements. Regulations and laws are subject to change, and changes may impact us in a variety of ways, including increasing costs to operate our business, limiting our ability to offer certain products or services, requiring us to undertake significant measures to comply with the changing regulations or otherwise impact the results of our operations.
Legislative and regulatory proposals continue to be introduced that could significantly affect consumer credit products and pricing, including proposals to impose caps on interest rates or fees, such as a proposed federal limit on credit card interest rates. If enacted, such measures could reduce interest income, alter product economics, limit the availability of certain credit products, or require material changes to underwriting, pricing, and risk management practices. The outcome, timing, and scope of these proposals remain uncertain, but their adoption could adversely affect our financial condition, results of operations, business and prospects. This competition could lead to adverse effects on our business, financial condition, or operating results and could also cause us to not pursue certain business opportunities.
In 2025, the United States Congress took action to reduce federal funding to the CFPB. The CFPB is currently undergoing changes as an agency in terms of leadership, direction, goals, and enforcement capabilities. The results of these changes are not yet known.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.22TABLE OF CONTENTSIncreasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks. Financial institutions continue to face evolving expectations from customers, regulators, investors, and other stakeholders regarding environmental, social, governance, and sustainability-related practices and disclosures. In addition, climate-related physical and transition risks may affect borrowers, collateral values, insurance availability, supply chains, and economic conditions in the markets we serve, while shifts in public policy, technology, and investor or customer preferences may affect certain industries and business activities differently. Adapting to changing regulatory requirements and stakeholder expectations, as well as managing risks associated with environmental and social developments, may increase operational and compliance costs, affect relationships with customers or business partners, and could adversely impact our reputation, access to capital, financial condition, and results of operations.
General Risk Factors
Weaknesses of other financial institutions could affect us. Our ability to engage in routine funding transactions could be affected by the actions and lack of commercial soundness of other financial institutions.Our ability to engage in routine funding transactions could be affected by the actions and lack of commercial soundness of other financial institutions. Financial services institutions are
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interrelated as a result of trading, clearing, and counterparty relationships, among others. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry in general, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions in the future. A default, or threatened default, of a large institution could negatively impact the entire financial system and could expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due us. There is no assurance that any such losses would not affect our financial condition or results of operations.
Further, weaknesses of other financial institutions can affect the demand for securities in the financial institutions industry, which could have a detrimental effect on the price of our common shares. For more details regarding the potential impacts of weakness in other financial institutions, see the Risk Factor titled “Our financial condition, results of operations, and stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.”
The fiscal and monetary policies of the United States government and its agencies could have an effect on our earnings. The Federal Reserve Board regulates the supply of money and credit in the United States, and its policies significantly influence funding costs, loan and investment yields, and net interest margin, as well as the value of financial assets such as debt securities. During 2025, the Federal Reserve eased monetary policy through several rate reductions following the elevated rate environment of prior periods; however, the future path of interest rates remains uncertain and policy decisions continue to evolve in response to economic conditions. In addition, recent public debate and legal challenges concerning the independence of the Federal Reserve, along with the anticipated transition to new Federal Reserve leadership in 2026, have contributed to uncertainty regarding the direction and implementation of future monetary policy. Federal Reserve policy decisions and related market reactions may adversely affect borrowers’ repayment capacity and asset valuations, and because such policies and leadership developments are beyond our control and difficult to predict, their impact on our financial condition and results of operations remains uncertain.
Changes in tax laws could affect our performance. We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, property, franchise, withholding and ad valorem taxes.We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, property, franchise, withholding and ad valorem taxes. Changes to these tax laws can impact our tax liability and the tax liabilities of our customers. Changes to our tax liability could have a material effect on our results of operations. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may affect our deposit levels and composition and customers' demand for loans and other products and services. Changes in taxes paid by our customers may affect their ability to purchase homes or consumer products, which could affect their demand for our loans and deposit 23TABLE OF CONTENTSproducts. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.
Adverse external events outside of our control, such as natural disasters, acts of war or terrorism and new public health issues, could impact our business operations. While we have implemented processes and procedures as part of our business continuity and disaster recovery plans, there is still the potential that adverse external events outside of our control, such as natural disasters, acts of war or terrorism, new public health issues, could impact our business operations. These events could impact our computer systems, communication systems, damage or destroy certain facilities or cause other impacts to our operations such as loss of power, as well as impact those systems, facilities and/or operations of our third party service providers. There is no assurance that our business continuity and disaster recovery plans can adequately account for all contingencies or adequately mitigate these risks, and the occurrence of these adverse external events could adversely impact our properties, operations, employees, customers, reputation, collateral securing loans and/or interfere with our borrowers’ abilities to repay their loans.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management and Strategy
Cybersecurity (cyber) risk is differentiated from information technology risk by threat interactions that yield high impact consequences and ever-increasing probability. While standard security operations address most day-to-day incidents, cyber risk includes motivated threat actors who often use advanced tools, techniques and processes to evade detection or inflict maximum damage to an organization's information assets. While standard security operations address most day-to-day incidents, cyber risk includes motivated threat actors who often use advanced tools, techniques and processes to evade detection or inflict maximum damage to an organization's information assets. Cyber threats and attacks adapt and evolve rapidly, and the Company works to continuously enhance controls and processes to protect its networks, applications, and data from attack, damage, or unauthorized access. Cyber threats and attacks adapt and evolve rapidly, so First Financial works to continuously enhance controls and processes to protect its networks, applications, and data from attack, damage or unauthorized access. Critical components to the Company’s cyber risk control structure include corporate governance, access management, threat intelligence, security operations, security awareness training, and vulnerability management programs. Critical components to the Company’s cyber risk control structure include corporate governance, threat intelligence, security operations, security awareness training and patch management programs. Cyber risk mitigation includes effectively identifying, protecting against, detecting, responding to, and recovering from cyber threats. Cyber risk mitigation includes effectively identifying, protecting against, detecting, responding to and recovering from cyber threats.
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a.Operational capability, including access management, cyber defense, vulnerability management, and third-party risk management.Operational capability, including cyber defense, vulnerability management, and third-party risk management.
b.Risk assessments, including GLBA assessments, penetration assessments and attack simulations.Risk assessments, including GLBA assessments and attack simulations.
c.Program maturity, leveraging the NIST Cybersecurity Framework.
d.Internal and External Audit, including external assessments , internal audit results, and regulator exam results.
The Company maintains an ad hoc committee comprised of senior management with responsibility for third party (vendor) risk management, including the CISO, the Chief Risk Officer, the Chief Compliance Officer, representatives from vendor management, and enterprise risk management associates. The ad hoc committee reviews diligence regarding vendors, including cyber diligence, and monitors any incidents or cybersecurity threats involving those third parties. Cyber diligence of critical vendors (vendors which store or interact with customers’ personally identifiable information) includes an annual review of the technology and data interfaces with the vendor, an annual review of the vendor’s cyber security controls, and monthly monitoring of the vendor’s outward-facing security posture.
The Company is not aware of risks from cybersecurity threats, including those resulting from any previous cybersecurity incidents, which have materially affected the Company, including its business strategy, results of operations, or financial condition.
Governance
First Financial’s Board of Directors is responsible for overseeing the Company’s cybersecurity risk management objectives and risk tolerance as part of its oversight of the Company’s compliance and risk management activities. Specific oversight of the cybersecurity function is delegated to the Board Risk Committee. The Chair of the Board Risk Committee has extensive cybersecurity experience, including both experience as a chief information security officer of a publicly traded financial institution and as an outside cybersecurity consultant. The committee chairperson maintains CISSP and CRISC certifications. Through the Board Risk Committee, the Board’s oversight responsibilities include:
a.establishing and guiding the Company’s cybersecurity risk tolerance, including the determination of the aggregate risk appetite and identifying the senior managers who have the responsibility for managing risk;
b.ensuring that the Company implements sound fundamental principles that facilitate the identification, measurement, monitoring and control of risk;
c.ensuring that adequate resources are dedicated to cybersecurity risk management; and
d.confirming that awareness of cybersecurity risk management activities is evident throughout the organization.
The Company has developed and documented an incident response plan that includes various levels of escalation in the event of a cyber incident. All incidents begin with information security and information technology associates, with escalation to a crisis management team comprised of the CISO, the Chief Risk Officer and certain designated members of executive management in the event the situation is severe. The crisis management team communicates with the full executive team and the Board of Directors in case of more severe incidents. More complete reporting is then provided to the ERMC and the Board Risk Committee during regularly scheduled quarterly meetings.
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